
Class 
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COPYRIGHT DEPOSIT. 



MATERIALS FOR THE STUDY 
OF ECONOMICS 



AGRICULTURAL ECONOMICS 



THE UNIVERSITY OP CHICAGO PRESS 
CHICAGO, ILLINOIS 



Bgents 
THE BAKER & TAYLOR COMPANY 

NEW YORK 

THE CUNNINGHAM, CURTISS & WELCH COMPANY 

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THE CAMBRIDGE UNIVERSITY PRESS 

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TOKYO, OSAKA, KYOTO, FUKUOKA, SENDAI 

THE MISSION BOOK COMPANY 

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KARL W. HIERSEMANN 

LEIPZIG 



AGRICULTURAL 
ECONOMICS 

A SELECTION OF MATERIALS IN WHICH 

ECONOMIC PRINCIPLES ARE APPLIED TO THE 

PRACTICE OF AGRICULTURE 



BY 

EDWIN G. NOURSE 
n 

PROFESSOR OF ECONOMICS, UNIVERSITY OF ARKANSAS 




THE UNIVERSITY OF CHICAGO PRESS 
CHICAGO, ILLINOIS 



c cf>yZj 



H^'^" 



The University of Chicago 



All Rights Reserved 



Published November 1016 



Composed and Printed By 

The University of Chicago Press 

Chicago, Illinois, U.S.A. 



NOV 13 1916 






i)CI.A4463;3 C v y~- 



PREFACE 

This volume represents an effort to carry over into agricultural 
economics some results of recent experience in the use of the discussion 
method of teaching elementary and intermediate courses in eco- 
nomics. The book aims to bring together in an orderly arrangement, 
(i) a store of information which may profitably come within the view 
of the student who desires to understand the economic phenomena 
of agriculture, and (2) a considerable number of opinions which have 
already been expressed as to the meaning of these facts. The intro- 
ductory discussions contributed by the editor are not designed to 
reconcile the theories propounded by the many authors quoted, nor 
to give an authoritative "interpretation" of the whole. In some of 
them are suggested the reasons which led to the inclusion of par- 
ticular selections, some of them point out salient aspects of the prob- 
lem dealt with in the chapter, some suggest the need of more careful 
scrutiny than seems as yet to have been given to one or another phase 
of our subject. Very evidently, then, the book is offered as food for 
thought and a stimulant to the thought-process, not as a scripture 
to be learned by rote. 

While, on the one hand, it does not aspire to give a final answer 
to all the economic problems of agriculture nor to teach a hard-and- 
fast system of rural economy, neither does it, on the other hand, con- 
tent itself with merely presenting a certain number of concrete 
"cases," putting upon the student the necessity of distilling the 
principles from the facts. For, even granting the possibility that he 
might achieve some measure of success in such an effort, it would be 
poor economy of labor. We should be accounted improvident if, in 
building our agricultural economics, we should fail to utilize, as fully 
as possible, the foundations laid in the past. The beginner will do 
well to avail himself of such principles as have already been formu- 
lated, making experimental applications of them to the actual condi- 
tions which he observes about him. Ultimately he may perceive 
deficiencies in these statements of economic law, but for a longer or 
shorter time they will furnish him a much-needed guide to critical 
and constructive thinking. The plan of this book, therefore, is to 
have each chapter (except a few which are frankly descriptive in 



vin PREFACE 

character) begin with a section devoted to the points of theory 
involved in that division of the subject. These readings are followed 
by others which present data for verification, illustration, or disproof. 
The principles quoted are not in all cases such as meet with the 
compiler's full assent, but careful effort has been made to include 
only such statements as are worthy of serious consideration and are 
likely to be of service in arriving at an understanding of the various 
problems. 

Clearly, the use of more and shorter readings, the greater stress 
upon organization of this selected material, and the chapter introduc- 
tions cause a book of this sort to be less a source book in the older 
and stricter sense, and to combine many of the desirable features of 
a text, while escaping its most serious drawbacks. For myself, I 
should call this a " composite textbook," and add that the material 
is presented in this form, not because native laziness has made the 
editor shirk the task of literary composition, but because of a belief 
that in this form it has the greatest teaching value. The author of 
a text aims to reduce to a single compact line of statement all the mass 
of fact and interpretation that he has marshaled together, and to 
give to his work a finished form — in short, to make a compelling 
statement of the one true gospel. But the first task for any compe- 
tent instructor, using that textbook so carefully organized for "clear- 
ness, force, and elegance," is to expand and supplement and alter 
according to his needs the material there presented. The text- 
writer constructs, as it were, a smooth, straight highway of thought, 
down which the student whizzes to his appointed destination without 
getting much benefit from the journey. He needs to tarry and visit, 
to wander back and forth, to explore the country and learn the whole 
region, if he is to be a well-informed traveler when he dismounts at 
his journey's end. 

The readings here presented have been taken from many settings 
and retain evidences of their points of contact, thus showing the rela- 
tions of the different portions of our subject to other phases of the 
life of which it is a part. Many spots of the ground are covered more 
than once in different connections and from different avenues of 
approach. This is not mere needless reiteration. Every experienced 
teacher knows that teaching consists largely in such repetitions, by 
which the student is led all around a subject in order to learn its 
different aspects and its many bearings. This is the purpose for 
which the teacher commonly uses "assigned readings." But the 



PREFACE IX 

assigned reading often contains, along with the matter wanted, an 
equal or greater store of things which the instructor does not care to 
have brought into the student's view at the moment. How often we 
find the student coming back with his mind full of just the wrong part 
of the discussion read ! For that reason no long readings are presented 
here: all have been "adapted" to exclude extraneous material and 
focus attention upon the point at issue. 

As for the general plan upon which the organization of the material 
has been made, it goes without saying that it follows the older rather 
than the newer type of economic thought. The decision to use the 
fourfold division into consumption, production, exchange, and distri- 
bution grew out of a desire to make the book most serviceable to 
present users, rather than out of any personal devotion to conservative 
ideals in the matter of economic exposition. Such teachers of agri- 
cultural economics as have broken with the orthodox traditions will 
readily reorganize these materials to suit their own purposes; others, 
I judge, will find the present arrangement convenient. 

This volume is intended primarily as the basis for a general course 
in agricultural economics covering three one-hour periods throughout 
a college year. Personally, I expect to use it in lieu of a textbook (as 
I have already used much of the material), though other instructors 
may prefer to use it in connection with a regular text. Much would 
depend upon local circumstances. If a course in elementary economics 
is a prerequisite for students in agricultural economics, it would seem 
that further use of a text could readily be dispensed with. In the 
case of a class possessed of no previous training in economics, assigned 
readings may be added either from one of the few treatises on agri- 
cultural economics or from the many on general economics. How- 
ever, it has been the intention to include readings covering enough 
of the fundamentals of economic theory so that a supplementary text 
might not be called for. A classbook of questions and exercises, now 
in course of preparation to accompany this volume, will, it is hoped, 
further develop and organize the materials for classroom use, and 
facilitate searching and profitable discussion of the economic problems 
treated in this volume. 

As for other uses, it is hoped that the book may be found a useful 
supplement to the text or other materials in courses in market ing, 
rural credits, or the like. Likewise, the interests of the many high 
schools which are today devoting a large measure of attention to 
agricultural affairs have been borne in mind. For the giving of added 



X PREFACE 

information about the farmer's economic life, even where no compre- 
hensive grasp of principles is attempted, many of these selections 
should prove helpful. 

The purpose of the book will be achieved if it be found to be a 
reservoir whose contents have been kept in a sufficiently fluid state 
so that many may come and draw to fill their different measures for 
their diverse needs — and if the average quality of the contents be 
found good. 

It is apparent that I am under heavy obligations to the many 
writers and publishers whose generous contributions have gone so far 
toward the making of this book. Their names appear from page to 
page. To others I am indebted for many helpful suggestions con- 
cerning the selection or organization of the material: to Associate 
Professor James A. Field and Assistant Professor Harold G. Moulton, 
of the University of Chicago, Dr. Charles L. Stewart, of the Univer- 
sity of Illinois, and to my colleague, Mr. J. S. Waterman. 

E. G. N. 
University of Arkansas 
September 10, 191 6 



TABLE OF CONTENTS 



PAGE 



Introduction: The Aim and Scope of Agricultural Economics . . i 

I. THE EMERGENCE OF THE PROBLEM OF AGRICULTURAL 
ECONOMICS 

Introduction 17 

A. Savage Beginnings 

1. The Domestication of Animals. Nicholas Joly .... 20 

2. The Beginnings of Plant Cultivation. ' A. P. de Candolle . 23 

B. The Pastoral Stage 

3. The Flocks and Herds of Palestine. Genesis 27 

4. Early' Pastoral Life in Northern Europe. William Cunning- 
ham 28 

C. Agricultural Development of the Ancient Nations 

5. Greek Husbandry. Percy Gardner and F. Byron Jevons . . 29 

6. Contemporary Accounts of Roman Farming 

a) Marcus Porcius Cato 31 

b) Marcus Terentius Varro . 32 

D. The Middle Ages 

7. Discouragement of Agriculture in Europe after the Fall of 

the Roman Empire. Adam Smith ........ 35 

8. Manorial Husbandry. Rowland E. Prothero 38 

9. Organization of the Manor. W. J. Ashley 44 

10. The Self-sufficing Character of the Manor. W. J. Ashley and 

R. E. Prothero 49 

E. The Agrarian Revolution 

11. The Decline of Feudalism and the Improvement of Agricul- 
ture. Rowland E. Prothero 52 

12. Enclosure and Better Farming. Arnold Toynbee .... 53 

F. America Recapitulating the History of Agriculture 

13. Colonial Farming. Benjamin Perley Poore 56 

14. The Self-sufficing Agriculture of a Generation Ago. Rodney 
Welch 6s 

15. Pastoral Life on the Agricultural Frontier. Ray Stannard 
Baker 66 

xi 



xii TABLE OF CONTENTS 

PAGZ 

G. The Transition to Commercialized Agriculture 

i 6. The Old Farmer and the New. Kenyon L. Butter field . . 68 

17. Where the Principle of Exchange-Production Has Been 
Abused. Mrs. G. H. Mathis 71 

18. The Position of the Farmer in Our Economic Society. Edward 

F. Adams 72 

II. CONSUMPTION 
Introduction 78 

A. General Principles 

19. Economic Laws of Consumption. Henry R. Seager ... 82 

20. The Dynamics of Wealth. F.A.Walker 87 

21. Food Needs and Food Habits. C. F. Langworthy ... 90 

B. The Relation of Public Consumption to the Farmer's 

Production 

22. "Consumption of Meat Encourages Agriculture." Arthur 
Young 93 

23. Unwise Consumption Means Costly Production. S. N. 
Patten 94 

24. Agriculture and the Liquor Industry. United States Brewers' 
Association . * 98 

25. Changes in Diet 

a) Away from Meat. /. Russell Smith 101 

b) Cottonseed Meal as Human Food. G. S. Fraps . . . 102 

c) Potatoes in Place of Bread. Weekly News Letter to Crop 
Correspondents . . . 105 

d) Use of Cheaper Food. G. F. Warren 106 

26. Modifying the Consumer's Demands 

a) Stimulating the Consumption of Citrus Fruits .... 107 

b) Publicity for the Peach. The Packer 108 

c) A Raisin "Ad" in 

27. Results and Limitations of Such Effort 

a) Indications of Increased Consumption. The Packer . . 112 

b) Reaching the Limit. The Packer 114 

C. The Administration of Farm Income 

28. Some Items of the Farmer's Living. W. C. Funk . . . 115 

29. Criticism of Present Conditions on the Farm. Reports 

No. 104 and No. 106, Office of the Secretary 117 

30. Poor Standards of Consumption as Related to Housing. 
Harvey B. Bashore 118 



TABLE OF CONTENTS Xlll 

PAGE 

31. Learning How to Spend. John M. Gillette 122 

32. An Efficient Standard of Rural Life. T.N.Carver . . . 124 



III. LAND AND OTHER NATURAL AGENTS OF 

AGRICULTURAL PRODUCTION 

Introduction . 126 

A. Area the Fundamental Fact 

S3. Some Figures Concerning Land Area 129 

B. The Relation of Climate to the Productivity of Land 

34. Agriculture's "Farthest North." W. P. Rutter : ... 130 

35. The Disadvantage of too Much Heat 131 

36. Local and Seasonal Peculiarities of Climate 

a) Frosts. Harry J. Wilder 133 

b) A Marginal Climate. Macy H. Lapham . . . . . 134 

c) Winds. L. E. Hazen 136 

37. Annual Rainfall of the United States. Map 137 

38. The Possibilities of Irrigation Farming. Carl S. Scofield . 138 

39. Need of Irrigation in the Humid Region. Milo B. Williams 142 

40. Dry Farming as a Means of Increasing Our Agricultural 
Product. E. C. Chilcott • . 146 

41. The Introduction of Dry-Land Plants. A. N. Hume and 
Manley Champlin 151 

42. Drainage as a Means of Reclaiming Land. Samuel H. 
McCrory 1 54 

43. Utilizing Plants of High Water Requirements. 0. W. Barrett 157 

C. Fertility as a Limiting Factor in Agricultural Production 

44. Chemical Content as a Measure of Productive Power. Cyril 

G. Hopkins 158 

45. Physical Factors Determining the Agricultural Quality of 
Land. Edward J. Russell 161 

46. Bacteria and Soil Fertility. P. E. Brown 167 

47. The Real Meaning of Soil Fertility and Soil Exhaustion. 
Edward J . Russell 172 

D. Topographical Limitations to Agriculture 

48. Soil Erosion. R. 0. E. Davis 174 

49. Grazing Where Tillage Is Impracticable. James Stephen- 
son, Jr 177 

50. Tree Crops for the Hill Lands. J. Russell Smith . . . . 179 



xiv TABLE OF CONTENTS 

PAGE 

E. The Law of Diminishing Returns from Land 

51. The Classic Statement of Diminishing Returns. David 
Ricardo 181 

52. Extensive and Intensive Margins of Cultivation. Henry 
Rogers Seager 182 

53. The Law of Diminishing Returns Elaborated and Qualified. 
John Stuart Mill 182 

54. Scientific Research as a Means of Increasing Agricultural 
Production. M. B. Waite 187 

F. The Conservation of Nature's Agricultural Resources 

55. The Demand for Conservation of the Land. James J. Hill . 190 

56. A Defense of the Pioneer. F. A. Walker 194 

57. The Future Use of Land in the United States. Raphael Zon 199 

58. One Avenue of Escape — Atmospheric Nitrogen. Thomas H. 
Norton 205 

IV. HUMAN EFFORT AS A FACTOR IN AGRICULTURAL 
PRODUCTION 

Introduction 210 

A. Population and the Labor Supply 

59. The Supply of Farm Labor. George K. Holmes . . . . 212 

60. Natural Increase of the Rural Population 

a) In Early Times. T. R. Malthus 218 

b) At the Present Time. Edward Van Dyke Robinson . . 218 

61. The Rural Exodus. Roy Hinman Holmes 219 

62. The Back-to-the-Land Movement. North American Review . 221 

B. Some Special Classes of Labor 

63. Immigration as a Source of Farm Laborers. John Lee Coulter 223 

64. Italians in Agriculture. Alexander E. Cance 228 

65. Asiatic Labor on the Pacific Coast. Immigration Commission 232 

66. Statistics of Negroes in Agriculture. Bureau of the Census . 237 

67. Decline in Women's Work. George K. Holmes .... 242 

C. The Question of Efficiency 

68. What the Farmer Needs to Know. G. F. Warren . . . 246 

69. Farming Demands Experience as Well as Knowledge. G. F. 
Warren 247 

70. Machinery Not Entirely a Substitute for Labor. Carl W. 
Thompson and G. P. Warber 248 



/ 
TABLE OF CONTENTS XV 

PAGE 

71. Vocational Training in the Rural High School. R. W. 
Stimson 249 

72. Farmers' Co-operative Demonstration Work. S. A. Knapp 252 

73. The Negro as a Farmer. C.E.Allen 255 

74. Rural Ill-Health as a Cause of Inefficiency. Allen J. Smith . 257 

D. Incentive and Discouragement 

.75. Good and Bad Management of Farm Laborers. Wisconsin 

Country Life Conference 258 

76. Tenancy as a Cause of Inefficient Labor. C. E. Allen . . 260 

77. The Stimulus of Farm Ownership 260 

78. Increasing Efficiency through Joint Action. California 
Commission of Immigration . . 261 

79. An Association for Better Farming. George W. Bush . . 262 

V. CAPITAL-GOODS AS A FACTOR IN AGRICULTURAL 

PRODUCTION 

Introduction 265 

A. The Significance of Capitalistic Methods 

80. The Economic Concept of Capital. Charles Gide . . . . 269 

81. Machinery as a Means of Increasing the Effectiveness of 
Labor. Commissioner of Labor 271 

82. The Relation of Farm Capital to Labor Income. E. H. 
Thompson and H. M. Dixon 274 

B. The Increase of Capital Employed in American Agriculture 

83. Concerning the Increased Use of Power Machinery on the 
Farm. Twelfth Census 276 

84. Farm Buildings, Farm Machinery, and Live Stock — 1900 to 
1910. Thirteenth Census 279 

85. A Concrete Case. Farmer's Bulletin ■ . 283 

C. Giving Capital Outlays Their Greatest Effectiveness 

86. The Efficiency of Capital-Goods as Related to Size of Farm. 

G. F. Warren , 284 

87. The Proper Apportionment of Capital Outlays. L. W. Ellis 287 

88. Overinvestment in Buildings and Machinery. G. F. Warren 291 

89. The Importance of Working Capital 292 

90. Varying Productivity of Individual Units in the Same Class 

of Capital-Goods. E. Davenport 294 

91. Protecting the Farmer against Inferior Capital-Goods. 
Public Acts of Michigan 296 

92. The Cost of an Irrational Purchasing Standard. /. F. 
Steward 209 



xvi TABLE OF CONTENTS 

PAGE 

D. Depreciation of Stock and Equipment 

93. Depreciation of Farm Machinery. F. W. Peck .... 300 

94. Waste of Capital Invested in Farm Machinery. E. M. D. 
Bracket 302 

95. Depreciation of Live Stock. W. J. Spillman 304 

E. The Accumulation and Conservation of Capital 

96. The Service of Capital and the Means of Securing It. T. N. 
Carver 306 

97. Rural Thrift and the Capital Fund 307 

98. The Role of Insurance 309 

VI. ORGANIZATION AND MANAGEMENT OF THE 
AGRICULTURAL ENTERPRISE 

Introduction 310 

A. The Meaning of Economic Organization 

99. The Function of the Organizer. Frank A. Fetter . . . 314 

100. Diminishing Returns from Each of the Factors of Produc- 
tion. T.N.Carver 319 

101. The Industrial Law of Diminishing Returns. F. M. Taylor 325 

B. Choice of Location and Enterprise 

102. Specialization and Efficiency. M. B. Waite 328 

103. Economic Considerations in Crop Selection. H. C. Taylor 329 

104. Determining the Adaptability of Enterprises. W. J. Spillman 33 2 

C. Economical Combinations of the Factors 

105. How Much Land ? M. B. Waite 336 

106. Factors Determining the Size of the Farm. W. J. Spillman 337 

107. Apportioning the Factors of Production. E. Davenport . 338 

D. Large- vs. Small-Scale Production 

108. The Passing of the Big Farm 

a) The Break-Up of the Plantation. United States Census 343 

b) The Failure of " Bonanza " Farming. Henry F. Blanchard 344 

109. The Little Farm WeU Tilled. Bolton Hall 345 

1 10. The Size of Farms as Related to Profits. G. F. Warren and 

K. C. Livermore 346 

E. Some Problems of the Farm Manager 

hi. The Farm Layout. W. M. Hays 349 

112. Effective Organization of the Working Force. W. J. 

Spillman 351 



TABLE OF CONTENTS xvil 

PAGE 

113. Economy of Horse Labor. G. F. Warren 355 

114. The Problem of the Feeder. Henry Prentiss Armsby . . 357 

115. Economy in the Use of Plant Food. Cyril G. Hopkins . . 359 
F. Forms of Business Organization 

116. Individual Enterprise — the Family-Farm. G.F.Warren . 360 

117. The Demand for Industrial Organization in Agriculture. 

Roy Hinman Holmes 362 

118. The Need of a Larger Unit of Organization. 0. F. Cook . 366 

119. Organizing the Community for Production. T. N. Carver . 368 

120. The Possibilities of Co-operation ........ 370 

VII. RECORDS AND ACCOUNTS AS MEASURES OF 
EFFICIENT MANAGEMENT 

Introduction 374 

A. Production Records 

121. Individual Performance of Dairy Cows. Clarence B. Lane 377 

122. Checking Up the Poultry Plant. G. M. Gowell . . . . 379 

B. Capital Accounts 

123. The Young Farmer's Need of a Yearly Business Inventory. 
United States Department of Agriculture 380 

124. Making the Inventory. Fred W. Card 381 

125. The Depreciation Account. E. H. Thompson and H. M. 
Dixon 384 

C. Financial Record of the Farm as a Whole 

126. How the Office of Farm Management Analyzes the Farm 
Business. E. H. Thompson and H. M. Dixon .... 384 

127. An Illinois System of Accounts. Farm Account Book, Col- 
lege of Agriculture, University of Illinois 391 

D. Comparison of Results 

128. The Deadly Parallel Column. Farm Account Book, College 

of Agriculture, University of Illinois 395 

129. Some Tests of Farm Efficiency. Farmers' Bulletin . . . 396 

E. Cost Accounting 

130. The Accounting Method of Studying the Farm Enterprise. 

H. C. Taylor 398 

131. A System of Farm Cost Accounting. C. E. Ladd . . . 405 

VIII. PRINCIPLES OF VALUE AND PRICE AS RELATED 
TO FARM PRODUCTS 

Introduction 414 

A. Theoretical Foundations 

132. Of Value and Price. John Stuart Mill 415 

133. Utility and the Demand Schedule. Alfred Marshall . . 4:1 



xviii TABLE OF CONTENTS 

PAGE 

134. Conditions of Supply. F. W. Taussig 427 

135. Monopoly Price. Henry Rogers Seager 436 

B. The Supply Side op Agricultural Prices 

136. The Effect of Over supply on Price. C. Wood Davis. . . 437 

137. Limited Supply and High Prices. Massachusetts Commis- 
sion on Cost of Living . 440 

138. Production and Population. Victor H. Olmsted .... 443 

139. Miscellaneous Features of Market Supply 447 

140. The Present Difficulty of the Specialty Farmer. G. Harold 
Powell 450 

C. Some Phases op Cost op Production 

141. Decreasing Costs under Intensive Methods. Lawrence G. 
Dodge 452 

142. Lower Costs to the Large Producer. Minnesota Experiment 
Station 453 

143. Increasing Costs in the Production of Beef. /. S. Cotton and 
W.F.Ward 455 

D. The Nature and Influence op Demand 

144. The Nature of Demand for Agricultural Products. John G. 
Thompson '. 456 

145. The Erratic Psychology of Demand. George K. Holmes . 461 

146. Demand and Market Price of Fresh Fruits. A. U. Chaney 465 

147. Increasing Demand and Rising Prices. Massachusetts Com- 
mission on Cost of Living 469 

148. Substitution as a Factor in Price-Making. Edward T. 

. Peters 470 

149. Miscellaneous Features of Demand 472 

E. Some Agencies of Price Control 

150. Coffee "Valorization" in Brazil. Lincoln Hutchinson . . 474 

151. Invoking Government Aid for Cotton Prices. Congressional 
Record 479 

152. Cornering the Market. American Review of Reviews . . 481 

153. Buying Trust and Producers' Pool. Anna Youngman . . 482 

F. The Mechanism op the Market as Influencing Prices 

154. Supply and Demand Brought Together through the Agencies 

of the Market 485 

155. The Role of the City Food Market. The Chicago Produce 
Market 487 

IX. MARKET METHODS AND PROBLEMS 
Introduction 489 

A. Organized Exchanges. 

156. Functions of Produce Exchanges. S. S. Huebner . . . 490 

157. Rules for the Grading of Grain. State Public Utilities Com- 
mission of Illinois 496 



TABLE OF CONTENTS xix 

PAGE 

158. The Meaning of "Basis" Contracts. Chicago Board of Trade 500 

159. Hedging to Protect Trade Profits. Henry Crosby Emery . 502 

160. The Effect of Speculation in Wheat and Cotton. United 
States Industrial Commission 504 

161. The United States Cotton Futures Act 506 

162. The Official Cotton Standards of the United States. United 
States Department of Agriculture 512 

B. Auctions and Public Sales 

163. Auction Sales of Fruits and Vegetables. Victor K. McElheny, 

Jr 5i3 

164. Marketing at the Stockyards. K. F. Warner . . . . 519 

165. Selling Cheese on the Dairy Board. H. C. Taylor . . . 522 

C. Private Dealers and the Middleman Question 

166. Various Types of Wholesale Traders. /. H. Collins . . 524 

167. The Retailer's Part. G. Harold Powell ...... 530 

168. "Swat the Middleman." Chicago Municipal Markets Com- 
mission 534 

169. The Seen and the Unseen. Frederick Bastiat . . . . 535 

170. The Argument for Specialization. L. D. H. Weld . . . 537 

D. Methods of Direct Selling 

171. Parcel Post Marketing. Lewis B. Flohr and C. T. More . 540 

172. Assistance from the Express Company 543 

173. Public Markets. /. W. Fisher 545 

E. Co-operative Sales Agencies 

174. Co-operative Selling of Grain and Live Stock in Minnesota. 

L. D. H. Weld 545 

175. Co-operative Marketing of Vegetables. L. C. Corbett . . 548 

F. Government Market Bureaus 

176. California's " State Commission Market " 553 

177. Work of the Office of Markets and Rural Organization. 
Charles J. Brand 558 

178. Market Organization on a National Scale. David Lubin . 561 

X. TRANSPORTATION AND STORAGE FACILITIES AS FACTORS IN 
THE MARKETING OF FARM PRODUCTS 

Introduction 566 

A. Transportation and Prices 

179. Freight Costs and Market Values. Frank Andrews . . . 567 

180. Transportation Rates and Cantaloupe Prices. Wells A. 
Sherman 574 

181. Enlarging the Zone of the City's Milk Supply. Eugene 
Merritt 576 



XX TABLE OF CONTENTS 

PAGE 

B. Improving Methods of Handling Farm Products 

182. The Loss Due to Bad Methods of Handling Eggs. M. E. 
Pennington and H. C. Pierce 577 

183. The Influence of Refrigerated Cars and Steamboats on the 
Fruit Industry. William A. Taylor 582 

184. Lowering the Cost of Team Hauling. Frank Andrews . . 587 

C. Railway Equipment and Services 

185. Methods of Handling Shipments of Fruit and Vegetables. 
Frank Andrews 589 

186. Concentration and Storage-in-Transit Privileges. T. F. 
Powell . 595 

187. Car Supply in Relation to Marketing the Wheat Crop of 
1914. G. C. White 597 

188. Terminal Facilities. Report of Committee on Terminals and 
Transportation of New York State Food Investigating Com- 
mission 599 

D. Some Phases of the Storage Problem 

189. Regulating the Sale of Cold-Storage Eggs 603 

190. The Length of Time for Which Goods are Stored. George 

K. Holmes 605 

191. The Limit to Cold-Storage Speculation. M. Lippitt Larkin 608 

192. Warehousing Helps the Farmer to Get Better Prices. 
Edwin Hobby 612 

XL THE RENT AND VALUE OF FARM LAND 
Introduction 614 

A. The Basis in Differential Return 

193. The Ricardian Doctrine. David Ricardo 616 

194. The Rent of Agricultural Land. F. W. Taussig .... 619 

B. The Nature of Competition for the Use of Land 

195. The Differential Productivity of Farmers. Henry C. Taylor 622 

196. When the Immigrant Competes for Land. H. A. Millis 626 

C. The Renting Contract 

197. Contract or Commercial Rent vs. Economic Rent. Immi- 
gration Commission 626 

198. Methods of Renting Land in Iowa. 0. G. Lloyd . . . 627 

199. Tenant Systems at the South 

a) In Mississippi. E. A. Boeger 630 

b) In Texas. Charles B. Austin 631 



TABLE OF CONTENTS xxi 

PAGE 

D. Land Values 

200. The Capitalization of Rent. Richard T. Ely 632 

201. Rent Returns and Speculation. 0. G. Lloyd 634 

202. The Inflation of Land Prices. California Commission on 
Immigration 636 

203. Causes Affecting Farm Values. George K. Holmes . . . 638 

204. Various Factors Affecting the Value of Land. L. W. Ellis . 645 

XII. LAND TENURE AND LAND POLICY 
Introduction 647 

A. Effects of Tenure on Farm Operation 

205. The Relation of Tenure to the Quality of Farming. 0. R. 
Johnson ' 648 

206. A National Waste. W. D. Boyce . 651 

207. Results under Different Types of Lease. 0. G. Lloyd . . 652 

B. Division of Income between Landlord and Tenant 

208. Landlords' Return in Relation to Tenant's Labor Income. 

E. A. Boeger 655 

209. Comparative Incomes in the Corn Belt. E. H. Thompson . 659 

210. A Liberal Stock-Share Lease. Bulletin 159, Iowa Experi- 
ment Station 661 

C. The Problem of Farm Tenancy in the United States 

211. The Trend of Land Tenure in the United States since 1880. 
Charles L. Stewart 665 

212. The Bright Side of Tenancy Statistics. Ernest Ludlow Bogart 670 

213. Forebodings for the Future. Philip R. Kellar .... 671 

214. When Tenant Farming Is Desirable. /. W. Froley . . . 673 

D. Land Policy and Land Reform 

215. The Effects of Our Public Land Policy. Benjamin H. 
Hibbard 674 

216. Our Land Policy as It Is and as It Should Be. Henry 
George 676 

217. Taxation as a Means of Discouraging Large Holdings. Laws 

of Oklahoma 679 

218. The Small Holdings Movement in England. C.R.Fay . 681 

219. Land Reform in Texas. Lewis H.Haney 681 

XIII. INTEREST ON FARM LOANS 
Introduction 6S4 

A. The Theory of Interest 

220. The Rate of Interest. F.A.Walker 6S5 

221. Conditions of Demand for Loan Funds. F.W.Taussig . 6SS 

222. Factors Determining the Supply of Capital. Richard T. Ely 691 



xxu TABLE OF CONTENTS - 

PAGE 

B. Other Factors in the Cost of Loans 

223. Gross Interest and Net Interest 693 

224. How to Lower the Cost of Borrowing. Charles G. Taylor . 694 

225. The Torrens System of Land Transfer. Jeremiah W. Jenks 698 

C. Some Causes of Variation in Interest Rates 

226. Interest Rates Paid by American Farmers. C. W. Thomp- 
son 700 

227. Seasonal Demand for Loans and Prevailing Interest Rates. 
Federal Reserve Board 707 

228. Bank Rates to the Farmer. Jesse E. Pope 708 

D. Making Interest Rates by Law 

229. Usury Laws and Their Enforcement 709 

230. "An Effective Usury Law." John Fields 709 

XIV. RURAL CREDITS 
Introduction .... J 712 

A. The Coming of the Rural Credit Problem 

231. Agricultural Depression and the Increase of Farm Mort- 
gages. /. R. Elliott 713 

232. The Census Report of 1890 on Farm Mortgages. Eleventh 
Census 716 

233. Farm Indebtedness in the United States. Jesse E. Pope . 720 

B. Farm Credit Institutions of the United States 

234. Mortgage Broker and Mortgage Company. James Willis 
Gleed . . . 723 

235. Some Mortgage Company Offerings 728 

236. Investments of Life Insurance Companies in Farm Mort- 
gages. Robert Lynn Cox 731 

237. Drainage Bonds as a Form of Agricultural Credit. Tom K. 
Smith 737 

238. Credit Extension by the Implement Dealer. United States 
Commissioner of Corporations 741 

239. Store Credit in the South. Lewis H. Haney 745 

240. Loans for the Cattle-Man. /. F. Ebersole 747 

C. Utilizing and Improving Existing Credit Agencies 

241. What the Farm Mortgage Bankers Offer. F. W. Thompson 750 

242. The Bankers' Effort to Improve Personal Credit in the South. 
Joseph Hirsch 756 

243. The Rate-Sheet as a Means of Standardizing Credit . . 757 



TABLE OF CONTENTS xxm 

PAGE 

244. Results Attained under the Federal Reserve Act. Federal 
Reserve Board 759 

245. The Commodity Regulation of the Federal Reserve Board. 

W. P. G. Harding 762 

D. Criticism and Proposals for Reform 

246. The Agricultural Credit System of Germany. LeRoy 
Hodges 764 

247. Can Co-operation Remedy Rural Credit Conditions ? Lewis 

H. Haney 769 

248. The Government Must Give Direct Assistance. Samuel M. 
Taylor • 772 

249. State Aid Unnecessary. Myron T. Herrick 775 

E. State and Federal Legislation 

250. Credit Unions in Massachusetts. Commonwealth of Massa- 
chusetts 776 

251. The Lending of State Funds in Oklahoma. Laws of Oklahoma 780 

252. The Missouri Land Bank Laws of Missouri .... 784 

253. The Federal Farm Loan Act 789 

XV. AGRICULTURAL WAGES 
Introduction 796 

A. Some Points of Theory 

254. The Nature and Rate of Wages. Edwin R. A. Seligman . 797 

255. The Laborer's Share in Distribution. A. W. Flux . . . 800 

B. Concerning the Demand for Labor 

256. Value of Product and the Schedule of Demand for Labor. 
George K. Holmes 806 

257. Seasonal Distribution of Labor in Relation to Demand. 

W. J. Spillman 810 

258. Making Labor Go as Far as Possible. J.A.Drake . . . 812 

259. The Labor Demands of Intensive Agriculture. H. A.Millis 814 

C. Forces Affecting the Supply of Agricultural Labor 

260. Some Factors Curtailing the Supply of Agricultural Labor. 
Alfred H. Peters S16 

261. The Competition of Non- Agricultural Employments. George 

K. Holmes 817 

262. Getting the Immigrant on the Land 

a) The Efforts of the Bureau of Immigration. T. V. 
Powderly SiS 

b) The Immigrant's Welcome. Samuel Gompers . . . S20 



xxiv TABLE OF CONTENTS 

PAGE 

D. Nominal Wages and Real Wages 

263. Real Wages of the Farm Laborer. George K. Holmes . . 822 

264. The Farm Furnishes a Living in Addition to Other Income. 

W. C. Funk 825 

265. The Farmer's Purchasing Power. Victor H. Olmsted . . 826 

E. Data from American Farms 

266. Wage Rates of American Farm Labor. George K. Holmes . 829 

267. The Farmer's Income. E. A. Goldenweiser 833 

XVI. SOME PROBLEMS OF AGRICULTURAL LABOR 
Introduction 8^8 

A. Hours and Conditions or Labor 

268. The Long Day. Carl W. Thompson and G. P. Warber . . 839 

269. A Ten-Hour Day. George T. Powell 840 

270. Attracting and Holding the Right Kind of Farm Help. 
World's Work 841 

271. Solving Labor Trouble in California. California Commission 

on Immigration and Housing 844 

272. Intemperance as a Labor Problem. Country Life Commission 848 

273. The Accident Hazard in Farm Work. Don D. Lescohier . 849 

B. Finding Men and Finding Jobs 

274. Harvest Hands in Kansas. Literary Digest 851 

275. Japanese Labor Contractors. H.A.Millis 852 

276. The Padrone System. Frances A. Kellor 853 

C. Woman and Child Labor 

277. Some Intimate Glimpses of Women's Labor. U.S. Depart- 
ment of Agriculture 854 

278. Child Labor in the Beet Fields. Edward N. Clopper . . 856 

D. The Coming of the Union 

279. Farm Hands on Strike .....". 860 

280. Agricultural Laborers' Trade Unions in France. International 
Institute of Agriculture 860 

XVII. PROFITS IN AGRICULTURE 
Introduction 867 

A. The Doctrine of Profits 

281. The Nature and Sources of Profits. Edwin R. A. Seligman 870 

282. The Conception of Pure Profits. F. A. Fetter .... 873 

B. Profits and the Assumption of Risk 

283. The Farmer's Risks. James Wilson 876 

284. The Will to Take Chances. H. A . Millis 876 

285. Speculation in Wheat-Growing. Current Opinion . . . 878 



TABLE OF CONTENTS xxv 

PAGE 

C. Evidence of Profits in Farming 

286. "Profits" on New York Farms. G.F.Warren .... 879 

287. Conditions in the Corn Belt. E. H. Thompson .... 882 

288. The Chester County Survey. W. J. Spillman .... 885 

D. Some Opinions on Profits in Farming 

289. "What Is the Matter with Farming?" Waldon Allan Curtis 887 

290. Farm Income Better than City Income. World's Work . 890 



INTRODUCTION: THE AIM AND SCOPE OF 
AGRICULTURAL ECONOMICS * 

From time to time, of late, we have seen an increasing number of 
colleges and universities adding some course or courses in agricultural 
economics to their published announcements of subjects of instruction. 
Sometimes these courses are actually presented as scheduled. Often, 
to my certain knowledge, they are not. But the name, at least, is with 
us, and many are asking (and perhaps not least of these are the wistful 
writers of the college announcements), "What is agricultural eco- 
nomics?" 

Possibly the only way to arrive at an answer strictly germane to 
the query "What is agricultural economics?" would be to tabulate 
these prospectuses from college catalogues, to ascertain and report 
the actual content of the instruction offered in classroom or lecture, 
and to review the textbooks or uncodified materials used in the con- 
duct of the courses. We shall, in fact, have some recourse to these 
methods at a later stage of our discussion. But the quest for a defi- 
nition may well include an attempt to set forth a fair ideal, instead of 
contenting itself with merely reporting the "spotted actuality." The 
really important question is what agricultural economics may be or 
should be, and in trying to find the most adequate answer that we 
can to that inquiry we must not be timorous of passing beyond a 
strict account of what now is. 



Doubtless the suggestion which comes most readily to mind is to 
the effect that agricultural economics is simply general economics 
applied to the particular business of farming. To answer thus is but 
to shift the question. What, then, is "general economics"? Very 
slight acquaintance with economics and economists would suffice to 
show that it is not one thing, but many. As to scope, method, point 
of view, purpose, and specific content there is widespread controversy. 
Their single element of unity consists in the fact that all these labors 
lie within the wide field of wealth phenomena. There is no pure 
strain of economics, any more than there is a pure strain of Americans. 

1 Adapted from the Journal of Political Economy, XXIV (April, 1916), 36$-$!. 



2 INTRODUCTION 

We have, instead, hyphenated economics, showing plainly their extrac- 
tion from political, philosophical, or other outlands, just as we have 
only hyphenated Americans, owning more or less remotely the ties of 
some European mother-land. To apply the term "orthodox econo- 
mists" to ourselves (or to our enemies) is but a harmless pleasantry, 
so long as American specific productivity, German socialism, and 
Austrian marginal utility contest the field with English classicism — 
and neo-mercantilist and neo-canonist doctrines crop out at every 
unguarded point. To retain the title political economy is frankly to 
admit a mixed descent, and join the hyphenated company of social- 
economics or the newer entrepreneur-economics. 

If, then, the " general economics" which is to be " applied to the 
particular business of farming" prove in fact to be any one of a num- 
ber of different doctrines, evolved from dissimilar philosophies of 
wealth, the question becomes pertinent whether they fit with equal 
ease into the rural setting, or whether certain of them have been 
elaborated from essentially non-agricultural data, and are applicable 
primarily to industrial and urban conditions; whether certain other 
of these economies adapt themselves peculiarly to a rural environment; 
and whether, perchance, a close inductive study of the business of 
farming might not serve to give a special direction to economic 
thought, a particularized body of economic doctrine — in short, an 
agricultural economics which shall be more than a mere application 
of industrial economics to agriculture. 

It is quite evident that the first economic ideas that were excogi- 
tated by men of the early day — before economic theories were differen- 
tiated from the general mass of domestic, political, or religious 
opinions — were derived primarily from agricultural data, since agricul- 
ture was so preponderantly the form of all economic activity. It is 
equally true, however, that the problems of value of product and cost 
of production took on but the haziest outlines until the development 
of commercial relations made clear the fundamental facts of exchange- 
value, and thus gave new emphasis to the relation between income, 
costs, and profit. The economic problem of agriculture (as something 
different from its merely technological problem) did not take shape 
until husbandry found itself overtaken by, and made part of, a differ- 
entiated commercial-industrial regime. 

The mere fact that economics began with an "agricultural system " 
or was, as it styled itself, an economie rurale, does not mean that it 
derived from rural data a set of answers to the questions which we 



INTRODUCTION 3 

now regard as of prime economic importance. In England the classic 
writers gave but scant attention to these ideas of the physiocrats. 
Adam Smith refuted the " agricultural system" in about one-tenth 
the space which he devoted to demolishing the arguments of mercan- 
tilism. He is interested primarily in the division of labor, the employ- 
ment of capital, and kindred topics, and, from his day on, the run of 
attention in Britain was toward trade and the new industrialism. 
Nor was it long before the growth of industrialism in America gave to 
our economic discussions a setting not dissimilar to that which com- 
manded the attention of European thinkers, and the men of the new 
American school owe more to English and Teuton inspiration than 
to a direct descent from the earlier native writers. Neo-classicism 
naturalized (and shall we say improved ?) amidst our new industrial 
surroundings the system that English writers from Smith to Mill had 
deduced from a similar but earlier period in the life of our British 
cousins. Specific productivity was the American elaboration of the 
germinal idea of marginal utility developed by Jevons and the Aus- 
trians. The more specialized this development became, the more did 
it depart from agricultural sources of inspiration, the more did it con- 
cern itself with the solving of problems of factory wages, interest upon 
funded capital, and the profits of industrial entrepreneurship, and the 
less pertinent did its discussions become to the problems of the organi- 
zation of farming and of the farmer's income. Should we take Pro- 
fessor Clark as typical of this movement, it seems evident that his 
mind has not been filled with contemplation of rural life and the 
economic activities of country folk. Though Clark took his cue from 
a suggestion of Henry George concerning agricultural utilization of 
land and labor 1 and from von Thunen's 2 analysis of rural enterprise, 
his own elaboration of the specific productivity doctrine seems dis- 
tinctly to be based upon conditions of incorporated capital, minute 
division of labor, and wire-edge competition in entrepreneurship and 
hence an imputation of productivity not dreamed of by the farm 
proprietor. 

In view of the fact that several of the recent writers seem definitely 
to have turned their eyes away from agricultural data, it appears all 

1 Clark, Distribution of Wealth, p. vii. 

2 Ibid., footnote, pp. 321-24. Those who do not find themselves in agreement 
with the specific productivity theory might feel that the very fact that von Thiinen 
was analyzing an agricultural situation was what saved him from going to the 
lengths to which Clark went. 



4 INTRODUCTION 

the more noteworthy that they have arrived at much the same con- 
clusion as did the early Americans, who could see nothing else. Both 
tend to eliminate the distinction between land and capital. 

This raises the whole question of the " surplus" concept, which is 
the keynote of so much of economic theory. From the physiocrats 
to Carver and Taylor, through classic and neo-classic lines of descent, 
there has been a school which views surplusness as an attribute of the 
land. The Socialists, on the other hand, were concerned with a sur- 
plus attributable to labor. And modern industrial economics inclines 
to identify the idea of a surplus with the function of entrepreneurship 
and to believe that such surplus goes inevitably to the controller of 
capital, whether the form of capital be land or other instruments of 
production. 

We have already noticed that this first idea has persisted from 
the most ancient to the most recent discussions of the economics of 
agriculture. Entrepreneurship as such is not an idea which has been 
very largely developed in connection with rural enterprise, but it is 
probable that the modern farmer who views his payments for rent 
or land purchase in the same light that he does his outlays for other 
productive goods comes to identify, at least vaguely, his chance of 
securing profits with his ability to control capital. If one now has to 
pay two hundred dollars an acre in order to get a farm and benefit 
from the extraordinary profits that accrue by reason of the outbreak 
of the European war or the rise in the cost of living, it is evident that 
the entrepreneur gains in agriculture are indeed a function of the 
control of capital. But when one could take up a homestead gratis 
from the government, the essential prerequisite to entrepreneurship 
was evidently not the control of capital, but the ability to endure 
hard work and privation and to bear many children. Since, however, 
these are personal qualities, their possessor commonly regarded all 
his income as the return to labor. In fact, it has been characteristic 
of our farmer folk that they have never formed the habit of thought 
which imputes some part of the total product to factors of production 
other than labor. Where they have created a value upon raw land 
and secured capital by a process of saving rather than by borrowing, 
the productive power so added has appeared hardly less personal than 
physical strength, native shrewdness, or an acquired education. 
When, after a generation or more of such conditions, mere ownership 
of land and capital passes over to non-resident hands, while the actual 
productive operations remain in the hands of the farmer, have we not 



INTRODUCTION 5 

the conditions for the development of a socialist philosophy in the 
open country, such as has never been furnished by slave and villein 
and yeoman types of farming ? 

Assuredly the inner facts of Granger legislation, the rural attitude 
toward Eastern mortgage-holders in the nineties, and the present 
gospel of hate toward the produce middleman would all be worthy 
of a careful search for the purpose of ascertaining whether here are 
or are not the inductive materials out of which our country popula- 
tions are building up a socialistic philosophy of their own. Certainly 
the call for state aid wails loud in the land whenever the farmer believes 
himself to be losing ground in his contest with other classes. Only 
the form of the demand changes with the times; from internal 
improvements to cheap money, from extensive bureaus of agriculture 
to rural credits. Lassalle's theory of Konjunctur finds a very pretty 
illustration when the farmer admits that the risks of modern com- 
mercial agriculture are too much for him to meet single-handed. To 
only a very small extent has he underwritten them through private 
agencies of equalization, such as hail-insurance companies. He seems 
more keen by far to socialize them through state activities paid for 
by taxes upon public-utility corporations or by customs duties. Some 
of the proposals soberly propounded by cotton-planters after the 
outbreak of the present war were calculated to take even a socialist's 
breath. 

The writer has no desire to press this discussion for its own sake. 
What has already been said is merely for the purpose of suggesting 
that there are fundamental questions of theory underlying the practi- 
cal programs whose discussion makes up so large a share of what we 
know generally as agricultural economics, but which all too often fail 
to touch bottom on any economic principle whatsoever. Agricul- 
tural economics is, no doubt, an application of general economics to 
the particular business of agriculture, rather than an independent set 
of doctrines built up out of a specialized body of data. But this is not 
to be an application entirely after the fact: economic laws are not 
promulgated like edicts from some imperial capital imperfectly 
informed concerning conditions within the province in which they are 
to be applied. All voices must be heard in the establishing of truths, 
not less than in the securing of political stability. If we are to avoid 
the dangers of an industrial economics of capital or a socialist eco- 
nomics of labor as well as an agricultural economics of land, the facts 



6 INTRODUCTION 

of farm enterprise must not be neglected in favor of the data of com- 
mercial and manufacturing activities by those who aspire to enunciate 
the principles of the science. 

To resort to an analogy, agricultural chemistry is not a science 
distinct from industrial chemistry and both of these in turn inde- 
pendent of some unspecialized general chemistry. It is, instead, the 
application of principles, supposed to be universally valid, to the par- 
ticular phenomena of agriculture. But the man who goes forth 
equipped with this general chemistry into the field of agricultural 
research begins at once to add to his store of knowledge of chemi- 
cal properties and reactions. He must qualify, correct, and extend 
those principles with which he first essayed to solve the chemical 
problems of soil fertility, of plant and animal life. And these labors 
of his, detecting error and discerning new truth, go in due time 
to enrich the central science of which his field is but a specialized 
department. 

Similarly, agricultural economics is not a science distinct from 
other economic science, nor, on the other hand, is it merely an art 
devoid of scientific implications and responsibilities. It may happen, 
indeed, that the very attempt to apply to agriculture, economic 
theories of supposedly general validity but elaborated from industrial 
surroundings, shall prove to be the test which reveals the inadequacy 
of their premises or the incompleteness of their analysis. At all 
events, the most careful builder of an economic system cannot felici- 
tate himself upon having achieved a really valid doctrine until he has 
ascertained the adequacy of his principles to explain the facts of rural 
as well as urban enterprise. 

Nor does it behoove us to be narrowly insistent that what appears 
to be the truth in our particular sphere is the truth about the whole. 
We should get a larger sense of relationships than did the blind men 
of the fable. The elephant is not a great serpent, even though a close 
inspection of his trunk might suggest such a thought; nor is he like 
a tree, though feeling of his legs shows them to be treelike; nor yet 
is he fashioned like a wall, though passing a hand over his broad, flat 
sides may lead one to suppose so. In fact, the whole truth even about 
trunk or leg or side can be perceived only when it is considered as part 
of a larger whole. The best hope we can venture for agricultural 
economics is that it shall take and maintain its proper place of depend- 
ence and assistance, and that general economics may be both its point 
of departure and the goal of its return. 



INTRODUCTION 



II 



But this is only half the story, and many who profess an interest 
in the subject would doubtless pronounce it much the lesser half. 
The demand of the hour is not for a science adjusted with nicer 
refinement to all phases of the truth, but for an art to give immediate 
and practical counsel concerning the conduct of today's farm under- 
takings. When technical improvements have gone as far as they may, 
it is still evident that modern agriculture is more than a merely tech- 
nological process, since the success of agriculture is to be measured 
in income and not alone in physical units of product. Toward this 
end of enlarging cash return in an exchange society the art of economic 
organization is not less important than scientific knowledge of fertility 
and plant and animal breeding. 

When we come to set forth this art of agricultural economics in a 
formal statement, however, it becomes evident that its character will 
be much modified by the nature of the goal we have in mind. Is it 
that of individual gain, national strength, or social well-being ? We 
in America have got, perhaps, far enough away from the older and 
narrower ideas of nationalism so that we feel little or no conflict 
between these latter two ideals. And under conditions of peace the 
economist would be likely to agree that a policy that secures social 
welfare makes, by so much, for national strength. However, the 
first group of writers who turned serious attention to the subject were 
not thinking solely of conditions of peace. In Germany the economic 
art of agriculture has not been concerned primarily with securing a 
large return to the farmer or of directing the productive forces of the 
nation into the channels where national resources and market condi- 
tions offered greatest return upon such expenditure, but a canny eye 
has been kept upon the exigencies of possible war and the need of 
having the country able to feed itself in such a crisis. By way of 
illustration, we may quote a few lines from a treatise on agricultural 
economics published in 1899: 

Under normal circumstances the domestic agricultural production of a 
nation should certainly provide for the needs of the resident population as 
to necessary products of the soil, especially as to the indispensable foodstuffs. 
Otherwise the country falls into a position of greater or less dependence upon 
other states, which are in a position to produce more human subsistence than 
is needed within their own domains. This dependence is especially pre- 
carious in time of war and for such lands as, like the German Empire, are 
bounded on nearly all sides by other countries, and have only a very limited 



8 INTRODUCTION 

access to the open sea. In a war with Russia, France, England, or several 
of these countries together, the adequate maintenance of the home popula- 
tion might be seriously endangered. To be sure, this danger is somewhat 
lessened by a strong fleet, such as we hope to have in our possession in the 
course of a few years, but yet is by no means entirely removed. It remains, 
at any rate, an especially vital problem for German agriculture to strive to 
provide its domestic needs of indispensable means of subsistence, and particu- 
larly its breadstuff s. Out of regard for its own existence, even, the govern- 
ment is compelled, so far as lies within its power, to assist agriculture in 
the solution of this problem. 1 

Thus is German agricultural economics indentured to the service of 
a politico-military master, rather than left to an intellectual freedom 
of enterprise. It is designated Agrarpolitik — a not- to-be-neglected 
segment of the cameral Nationalokonotnie. 

Quite different is the economie rurale of France, and decidedly 
worthy of our attention because it appears to be most closely akin to 
much of the work which has been done in our own country. While 
the character of the German Agrarpolitik was being determined by 
the dedication of all scholarly endeavor as well as material resources 
to the purpose of national strength and self-sufficiency which has been 
unfolding since 1870, France has thought more in terms of individual 
prosperity of her farming population as furnishing the raw material 
of national well-being. Agricultural economics has been viewed as 
the culmination of a mighty effort on the part of agricultural science 
to put in the hands of the cultivateurs of France the most complete 
intellectual equipment possible for the pursuit of their calling. We 
may well let Jouzier, who has written probably the best of the French 
texts, speak for himself and his colleagues. He points out that, after 
the agriculturist has had a thorough training in pure science and the 
sciences technologiques of his craft — 

He is then able to practice the art of agriculture, which involves simple 
transformations of material by the process of cultivation, but not the indus- 
try of agriculture, which involves, at the same time and to a greater extent, 
the realization of an increase of wealth. And he needs, moreover, in order 
to enable him to accomplish this double purpose, to appeal to social science, 
which teaches him to understand man so far as he is a social being, the needs 
and desires which govern him, the higher laws which he obeys in the social 
relationships which he forms with his fellow-men; he ought lastly to have 
recourse to rural economics in order to learn, as we have said before, to 
co-ordinate the action of all his industrial resources, to the end of making 

1 Goltz, Vorlesungen iiber Agrarwesen und Agrarpolitik, p. 11. 



INTRODUCTION 9 

the greatest profit possible But if, according to our point of view, 

rural economics remains the science of the internal organization of the 
agricultural enterprise, we shall not commit the mistake of confining it 
within too narrow limitations and excluding from its province all that con- 
cerns the relationships of the enterprise with the outside world It 

is, so to speak, the agricultural science of sciences, not because it claims a 
quality of superiority, but because it draws upon them all and sums them 
all up to speak the last word of technological science, profit. 1 

Here in the United States, anything approaching systematic study 
of the economics of agriculture was deferred until a very recent day. 
The extraordinary circumstances of the free-land period tended both 
to direct men's minds away from purely economic theorizing, and to 
mislead them when they did attempt to pass strictly economic judg- 
ments upon what was taking place in our agriculture. The outstand- 
ing facts about our farm situation were those of national enlargement, 
the growth of a home market for manufactured products, eternal 
speculation in land, and the providing of an attractive alternative of 
free enterprise on the farm for all who had accepted wage or salaried 
positions in trade or industry. Psychic satisfaction, speculative gain, 
the need of protecting an investment in land, or the inability to get 
away from a sorry venture in farming — these, with immigrant wage 
and living standards and blindness to the facts of impairment of fer- 
tility, conspired together so to obscure the issues as to actual costs of 
production and return to labor and capital that the whole situation 
touching the supply of agricultural products was thrown into con- 
fusion. Men acted as though they conceived themselves to be living 
under an economic moratorium, and the probability of an ultimate day 
of settlement was calmly disregarded. But the na'ive assertion that 
"rainfall follows the plow" met tragic refutation in the years that 
followed 1883, and the widespread collapse of farm prices in the 
eighties and early nineties brought a strong revulsion from the craze 
of agricultural adventure. 

1 E. Jouzier, ficonomie rurale, pp. 14-16. By way of formal definition, he says 
(after giving the Greek etymological meaning of the word "economics"): "The 
addition of the modifier rural simply marks out the boundaries of the field for which 
it is to be understood. Instead of saying the household, we should say the rural 
household. And as the rural household is the farm, or, more precisely, the agricul- 
tural enterprise, we shall say that rural economics is the branch of agricultural science 
which 'teaches how to organize the various elements which constitute the resources of 
the cultivator whether in relation to each other or with respect to persons,'' in order to 
assure the greatest prosperity to the enterprise." 



IO INTRODUCTION 

Of the physicians who undertook to minister to the farmer's ail- 
ments, two schools may be distinguished. The homeopaths, who 
believed that like cures like, attacked the ill of over-production by 
seeking to remove every obstacle that stood in the way of maximum 
yields of grains, of animal products, or of textiles. Such were the 
efforts of the numerous departments of agriculture, agricultural col- 
leges, and experiment stations, which were being established one after 
another in the latter half of the nineteenth century. The allopaths, 
on the other hand, put their faith in stronger draughts of remedial 
legislation, such as cheap money (whether silver or greenback), the 
curbing of the railroads, tariff legislation, the lightening of taxation, 
and the curtailment of banks' and mortgage-holders' powers. 

It might be hazarded that the greatest immediate benefit to the 
patient came from the old-fashioned process of "bleeding," whereby 
a considerable volume of country population was drained away to 
the cities during the years of agricultural depression. But, however 
that may be, agricultural economics has emerged as an eclectic move- 
ment superseding the two earlier schools. Since agriculture aims, 
not at bigger corn and fatter hogs as such, but at larger financial net 
returns, and since even political measures of reform must depend for 
their effectiveness and permanence upon their economic soundness, 
the hope of both the farmer and his friends has come to be placed 
more and more upon a broader and deeper understanding of the price 
relationships involved in the carrying on of our commercialized busi- 
ness of farming. 

As already indicated, our professional economists have taken com- 
paratively little part in the formulation of an agricultural economics. 
Whether because they were not sufficiently familiar with the data of 
scientific agriculture, or because they were too much engrossed in the 
study of the many pressing problems of our bewilderingly expanding 
industrial life, they have as yet sent but^few adequately trained 
workers into the rural field. The task was accordingly undertaken 
by those already engaged in the work of instructing and helping the 
farmer. The need for economic readjustment came most pressingly 
to the attention of the men who had been commissioned first to work 
out a better technique of farming. Foremost among them were the 
administrative officers of our agricultural colleges and bureaus of 
agriculture, both state and national. These men did their splendid 
best to meet the new demand. But it can hardly be denied that much 
of the discussion which resulted has been of a decidedly inadequate 



INTRODUCTION II 

sort. This is but the inevitable consequence of the fact that the 
workers were trained as horticulturists, soil chemists, or veterinarians, 
rather than as economists. Their lack of specialized training caused 
the treatment of the subject to be fragmentary and superficial — pre- 
scribing salve for outbreaking sores, rather than tracing back the 
chain of their causation to some constitutional or organic derange- 
ment. Strangely enough, in the very quarters where the scientific 
method had been enthroned by chemist, entomologist, thremmatolo- 
gist, agrostologiat, and all the numerous brotherhood of scientific agri- 
culture, it was empirical methods that were resorted to in the attack 
upon the economic problems of agriculture. Rural credits have been 
discussed as though the cost of capital accumulation or the produc- 
tivity of capital outlays had no bearing on the question; farm prices 
in terms of "the parasitic middleman"; and the whole question of 
utilization and conservation of natural resources under the blanket 
of the " inherent rights of the farmer." 1 Co-operation is urged as a 
panacea for all rural ills, not as merely one particular form of economic 
organization, whose effectiveness in operation is determined and 
limited by the appropriateness of that special type to tfie given 
situation. 

Schools that give evidence of the highest ideals so far as their tech- 
nical courses in agriculture are concerned, who would regard it as 
fairly impious to offer courses in agronomy, animal husbandry, or 
horticulture without demanding a thorough grounding in chemistry, 
biology, and physics, appear to think that nothing but common-sense 
is prerequisite to a mastery of the most complex of the economic prob- 
lems with which our agricultural industry finds itself confronted. 
Many such institutions, even some agricultural colleges in important 
farming states, offer no comprehensive survey of the field of agricul- 
tural economics but, instead, one or two separate subjects (co- 
operation, marketing, and rural credits are the favorites), which must 
in the nature of the case be mere descriptive treatments, since the 
students have had no previous training in general economic principles. 
Often the instructor himself has little more. 

We are all aware, however, that the last few years have witnessed 
a considerable change, and that the subject has been greatly advanced. 
Young men who were intimately interested in, and familiar with, 
agricultural conditions (and who thus avoid the disability under which 
the older economists labored) have been carefully training themselves 

1 See Report of the Country Life Commission, pp. 29-41. 



12 INTRODUCTION 

in economics (thus escaping the limitations of the older agriculturists) 
with the definite purpose of making a professional career in the field 
of agricultural economics. The question then obtrudes itself: What 
conception does this emerging group of specialists entertain concern- 
ing the subject which they are in process of elaborating ? Here we 
find, as previously suggested, a striking kinship with the French 
economie rurale. The goal set up is productive efficiency, and agri- 
cultural economics aspires merely to extend the farmer's technique to 
cover and control value returns as well as mere physical units of 
product. Most of our agricultural economics has been developed in 
connection with our colleges of agriculture and, without disparaging 
its very great value and service, it may be suggested that current 
conceptions of the subject still remain somewhat under the shadow 
of this agricultural-college origin. That is, the system of independent 
and individually organized farm operation, which has grown up in the 
United States during the cheap and free land era, is taken as the 
datum plane above which is to be erected a structure of prosperity 
and economic efficiency. It may be an entirely valid conclusion of 
sociology or political science that we need to maintain an independent 
land-owning class of farm proprietors. But it is obvious that the 
economic theory of agriculture built upon such a premise is likely to 
be quite different from one constructed by economists untrammeled 
by preconceptions other than those laws (such as diminishing returns 
or the broader principle of combining proportions) which are the 
foundations of their own science. 

There has been another group of thinkers, to be sure, growing up 
outside the professionally agricultural interests in recent years, as the 
failures or distresses of farm life and industry have crowded them- 
selves upon genera] public attention. Migration to the city, decline 
of our agricultural surplus, and the rising cost of living have caused 
merchants, bankers, educators, politicians, and even the private con- 
sumer, to feel a sudden access of interest in questions touching the 
economic organization of our agriculture. They have not been con- 
cerned primarily about the prosperity of the individual farmer nor 
pledged to maintain the existing order, but they have been decidedly 
solicitous about the efficient working of the system as a whole, to the 
end that there may be cheap and abundant materials for trade and 
manufactures and a lower cost of living. 

Now many of these persons have taken the position that the 
efficiency and success of agriculture as a whole are to be obtained only 



INTRODUCTION 13 

by giving to the farmer-as-we-find-him a better training for his task 
and by making this training include business as well as scientific 
aspects of farming. Professor Carver writes a book to "emphasize 
the public and social aspects of the problem," 1 and Mr. Roosevelt 
launches a Country Life Commission for " better farming, better busi- 
ness, and better living." But these efforts to make more stable the 
economic foundations of the existing politico-social system, as they 
work downward from the security of the yeoman class to the prosperity 
of the individual farmer, meet the rural leaders who are striving 
upward from personal success to group solidarity, and both join hands 
in a practical program of rural betterment. 

It is evident, however, that this second movement is by no means 
the American counterpart of the Agrarpolitik of Germany. To be 
sure, it regards the country as the natural breeding ground of the 
nation, and the country family as the bulwark of our social and 
political system. But it does not propose that the whole course of 
agricultural production should be stimulated or retarded or, in general, 
artificially directed by means of tariffs, bounties, special transporta- 
tion rates and labor arrangements toward the goal of national 
self-sufficiency in time of war. It is concerned rather with the 
maintenance of " economic independence," the most productive use of 
natural resources, and a proper balance between extractive, com- 
mercial, and manufacturing industry. But a close scrutiny of this 
recently awakened concern in farming as a business will serve to 
reveal possibilities of a new economics of agriculture which shall be 
more independent, more searching, and more thoroughly economic in 
character than any we have known in the past. 

In the wild turmoil of exploitation, agricultural issues were con- 
fused; in the subsequent swing of interest toward trade and manu- 
factures they were to a large extent neglected. But the present 
lively interest in agriculture promises a better balancing of our various 
industries and the thorough, patient disentangling of the economic 
issue concerned with agriculture. What we have learned in the more 
highly (and perchance less personally) organized departments of indus- 
trial life will give us at least hypotheses and suggest ways of going 
about the analysis of the problem of agriculture. Entrepreneurship, 
for instance, has come to be viewed as a distinct factor in economic 
enterprise, with a definite and recognized position of reward and 
service. What shall we say of entrepreneurship in agriculture ? 

1 Principles of Rural Economics, p. v. 



14 INTRODUCTION 

Evidently there is opportunity and need for the economist to analyze 
and expound this phase of agricultural organization. One suspects 
that he might reveal significant wastes of managerial ability in a sys- 
tem where the great majority are limited to small, privately organized 
farms, and a crippling lack of such ability where nearly every farm 
worker must organize and conduct his own industrial unit. Much 
the same may be said for capital and labor. When the alert business 
man finds that there are opportunities to make capital earn larger 
returns in agriculture under his own direction than by loaning it to 
farmers, or greater chances of reward to entrepreneurship in farming 
than in commercial operations, then we may be sure that the existing 
organization is going to meet competition of a new order. Whether 
the economist shrewdly traces out these influences and tendencies a 
day before they become working realities, or whether he be simply an 
up-to-date and intelligent interpreter of what is going on about him, 
his services in this direction are much needed if we are to act intelli- 
gently toward the future of our husbandry. 

Agricultural economics should teach us to think through the 
Utopia of co-operation or the bogey of corporation farming to the 
fundamental issues of effective economic organization of human effort 
and natural resources, which underlie them. Beneath the superficial 
problems, such as how best to distribute a carload of peaches, to pro- 
cure a blooded breeding animal, or to effect the underdrainage of a 
particular field, are to be discerned certain larger, more general prin- 
ciples whose operation determines what is the most efficient way of 
equipping labor with capital-goods and captaining it with entrepre- 
neurship for the production of agricultural commodities. That is the 
ultimate problem of agricultural economics, and, whether social wel- 
fare or private gain be taken as the point of departure, the real battle 
must be fought upon this ground. 

To set forth explicitly the goal and purpose of our work is in large 
measure to clear up our ideas as to the proper scope and manner of 
treatment of the subject itself. The essential reason we have for 
teaching economics at all is that the student may learn to " think 
economics," to trace the cause-and-result sequence as touching the 
phenomena of wealth, whether the specific problem in which these 
phenomena have their setting be one which involves his immediate 
interest in private income and property or the larger interest which 
as a citizen or member of some other social group he is bound to have 



INTRODUCTION 15 

some part in shaping. By the same token, our purpose in elaborating 
an economics of agriculture is to train the agriculturist in the business 
principles which govern the commercial success or failure of his enter- 
prise, but not less to enable him, and likewise those others who are not 
engaged in agriculture, to perceive the economic results which will 
flow from one sort of agricultural organization or another, from one 
sort or another of consumption of our resources of land, labor, and 
capital. 

For the college of agriculture there should be, by way of founda- 
tion, a general elementary course covering the fundamental principles 
of economic theory. The elementary course in economics as pre- 
sented in most American colleges and universities today has been 
pretty well standardized: this same general subject-matter is well 
suited, by merely substituting the facts of agriculture, to point the 
morals and adorn the tale, to furnish the content of the basal year in 
agricultural economics, leaving to subsequent courses the more 
detailed treatment of special phases of the subject. An examination 
of textbooks and college announcements seems to indicate that at 
present most courses begin with a rather detailed study of production 
(now often including marketing) and, except for the many who stop 
with that, leap over to a fragmentary discussion of distribution as 
touching the farmer's profits. But this is no adequate preparation 
for meeting the more intricate problems facing modern agriculture. 
The student, besides examining the economic factors in technical 
productive efficiency, needs to understand the laws of value and the 
process by which physical units of product are fitted to psychic units 
of want through the agency of an exchange mechanism; he needs to 
consider, not only how this aggregate lump of values is broken up into 
private incomes, but how the use of this wealth in private hands reacts 
upon the further operation of the system. Even when for practical 
reasons the course in agricultural economics must be much com- 
pacted, it should be reduced to a stout framework of fundamental 
principles instead of bloating into a flabby mass of descriptive gen- 
eralities. The sea of print inundates the country as well as the city 
today, and the young man who goes out from the agricultural college 
will have presented to him more than enough plans and projects and 
suggestions concerning the conduct of his business. Our best service 
is in training him so that he will think clearly and choose wisely, to 
enable him to distinguish between alluring promise and innate possi- 
bility of performance. 



16 INTRODUCTION 

But such labors with and for the student who expects to take his 
place in the agricultural class is not all. The status of our agriculture 
is not exclusively the concern of country people, but is an issue of the 
highest public moment. As such it should command a broad and 
deep attention. We have long since perceived the value of presenting 
courses dealing with labor unions, trusts, and railways to young men 
who do not anticipate ever joining a union or employing others who 
have, who will certainly never be directors in even a small corporation, 
and who may never even so much as own a share of industrial stock or 
a railroad bond. It is clearly a matter of much importance that the 
college-trained men of the oncoming generation shall be prepared to 
act intelligently, whether as business men or as citizens, with reference 
to these great economic institutions. But surely the importance of 
agriculture in our whole industrial system is great enough to justify 
in no less measure the inclusion of at least one solid course in agricul- 
tural economics in the curriculum of every great university, even 
though it have no professional school of agriculture. 



THE EMERGENCE OF THE PROBLEM OF 
AGRICULTURAL ECONOMICS 

Introduction 

The time ordinarily devoted to a general course in agricultural 
economics does not permit of indulging in any extended survey of the 
history of agriculture. Yet it seems quite indispensable to a full 
understanding and a fair appraisal of present situations, that one 
should have some little acquaintance with the conditions and circum- 
stances out of which they have grown up. For immediate problems, 
even though brief and local in their manifestations, are not isolated 
phenomena, but are new phases or more complex forms of problems 
that have often vexed the husbandman before. 

All that can be attempted within the scope of this volume is a 
lightning journey through the ages, glimpsing the most striking and 
typical of the steps which mark man's progress from the savage state 
to our present organization of agriculture. This should give at least 
a sketchy background against which to view current events and insti- 
tutions — a thing quite necessary to the keeping of a true perspective. 
We have had, in the United States, a remarkable uniformity of agri- 
cultural experience and organization, with very few antique survivals. 
As a result, one often finds it necessary to emphasize the obvious 
fact that agriculture was not, indeed, ordained by the Morrill act 
and the Ordinance of 1787. Our look forward upon the future 
organization of agriculture should not be constricted by so brief a 
tradition as that of the American "homestead" farm of one hundred 
and sixty acres. Rather it should be oriented by the long glance 
backward over the whole of the road which society has thus far 
traveled. 

Such a review can hardly fail to impress one with the painful 
slowness with which agricultural evolution has been accomplished. 
Ages were consumed by our savage ancestors in puzzling out even the 
crudest devices for feeding themselves more amply than was possible 
through mere passive reliance on Nature's bounty. Even when pres- 
sure of numbers brought added stimulus to effort, the ancient peoples 

17 



18 AGRICULTURAL ECONOMICS 

met with but meager success in their attempts to circumvent the 
"niggardliness of Nature." The narrow limitations of their knowl- 
edge prevented them from securing any considerable control over 
natural forces. Energies were directed toward rinding new Gardens 
of Eden, where the gods gave lavishly (or of fighting for possession of 
the old ones), rather than toward perfecting an art of food production. 
Not till the coming of modern natural science did agriculture become 
either so productive or so dependable that it could be extensively 
commercialized. And it is this commercialization of agriculture that 
I marks the emergence of the modern economic phase of this ancient art. 

This new feature is popularly described as the "business of farm- 
ing." The economist would perhaps supplement that phrase by add- 
ing that it is an attempt to organize technical efficiency in agriculture 
upon a plane of "pecuniary valuation." By this he means that it 
is not enough for the farmer to consider merely the bulk of goods 
which he is to produce, content in the thought that more^oods mean 
more to eat and to wear. Instead, he must bear constantly in mind 
the price for which he can sell the goods which he produces and like- 
wise the prices at which he can secure the machinery, seeds, and fer- 
tilizers used in such production; he must have regard to the money 
wage he must pay to secure labor and the price he must pay, as inter- 
est, to secure the use of capital. Like every other industry, agricul- 
ture today is controlled and directed by the influence of prices, 
arrived at through the process of bargaining. 

Such has not always been the case. For many centuries in the 
early life of the race the production of food, clothing, and other 
agricultural goods was communal. The producing unit, whether 
family, clan, or tribe, was sett-sufficing; it produced goods for its own 
use, and had few if any exchange relations with other groups. Within 
itself, too, price relations were unthought of. Labor was not organ- 
ized on a basis of money wages, and loan capital was unknown. In 
the fighting clan, the labor element in production was merely a by- 
product of military enterprise, and the issue was not whether the 
proprietor could afford more help, but whether a campaign could be 
successfully carried off. 

The pastoral stage of development was characterized by a patri- 
archal type of organization, and both labor and the rewards of labor 
were assigned in accordance with rules of status. It was a purely 
domestic arrangement (perhaps under religious sanctions) which 
determined how much labor should be rendered and how much of the 



THE PROBLEM OF AGRICULTURAL ECONOMICS 19 

common profit enjoyed by the son or daughter and by the kin of vary- 
ing degrees of relationship tcx^he head of the patriarchal household. 
As for the feudal regime of the Middle Ages, Professor Ashley has 
admirably pointed out how fully the activities of the manor were dic- 
tated by custom and how completely competition was excluded. 
Under all these older types of social organization, the economic prob- 
lem of agriculture was absent or, speaking more accurately, lost to 
view beneath some other aspect — political, domestic, military, or 
whatever. 

It is evident that even in the earlier stages of this process economic 
considerations began, here and there, to emerge. Slaves, which at 
first were merely plunder from the conquered enemy, came to have a 
market value, based upon capitalization of their labor power. Like- 
wise, labor dues under the feudal system were arranged somewhat 
upon an exchange basis, labor being the price of military protection or 
judicial security. Barter grew up, and in time the articles exchanged 
came to have their values computed in terms of some standard unit, 
such as a sheep or a measure of grain or oil — primitive types of 
money. 

In all these cases the conduct of agriculture was becoming an 
economic and not merely a technical problem. The development of 
Mediterranean commerce and of Roman ideas of property rights went 
far toward defining the problems of agricultural economics in classic 
times, but the social organization of the Middle Ages again obscured 
consideration of a purely economic character behind a haze of politico- 
ethic conceptions of "just price" and feudal right. It was in the 
break-up of feudalism and the coming of the Industrial Revolution, 
therefore, that the modern economic problem of agriculture emerged — 
to be a vital issue for Western Europe and a gradually enlarging por- 
tion of the rest of the world ever since. 

In America, the flood of free land, the spread of new settlements 
beyond the reach of transportation facilities, the scant use of cur- 
rency, and the absence of pecuniary emulation where all men were 
substantially equal and opportunities for spending were few, brought 
a brief respite from the problem along our frontier of exploitation. 
But since the latter part of the nineteenth century (and in the older 
sections, much earlier), the problem of how best to organize agriculture 
as part of a price-regulated society has been full upon us. Only in 
proportion as we attain, from year to year, a more adequate compre- 
hension of the constantly changing details of this problem and make 



20 AGRICULTURAL ECONOMICS 

adjustments of our actions and our institutions to fit these evolving 
needs, can we think ourselves to be even on the road toward its 
solution. 

A. Savage Beginnings 

i. THE DOMESTICATION OF ANIMALS 1 
By NICHOLAS JOLY 

When we consider the immense difficulties which primitive man 
must have encountered in the task of subduing an animal so powerful 
as the wild bull, so swift as the horse, so fierce as the dog in its natural 
state, we may well wonder how he could tame these wild creatures 
and render them useful allies and devoted servants. Now that the 
work is accomplished, nothing seems to us more simple than domesti- 
cation, but there is nothing voluntary on the part of the animal in 
this association between the beast and man, his master. The lamb 
did not become of its own accord a submissive victim, nor did the 
bull voluntarily submit its neck to the yoke, nor the horse open its 
mouth to receive the bit. But man has discovered and turned to 
account in most of the animals he has subjected to his rule an 
instinct of sociability, existing together with the love of independ- 
ence, and predisposing them to domestication. Here once more his 
intelligence created him king; it enabled him to discern among the 
beasts of the forest those which would be most useful to him by 
furnishing him with flesh, milk, muscular strength, soft warm fur — 
all the resources of their instinctive and sagacious faculties. In this 
respect the work of our early ancestors is so complete that the lapse 
of many centuries has added but little to the riches acquired by 
them. 

What species of wild animal was first chosen for domestication 
and at what epoch it was first tamed is a question which, though 
often discussed, has as yet received no satisfactory answer. Paleon- 
tology, however, has lately added another argument in favor of the 
opinion of those who hold that the dog was the first animal subjected 
to the dominion of man. Professor Steenstrup has proved that the 
dog hunted with man and shared his repasts at the remote epoch of 
the Danish kitchen middens. The eminently sociable disposition of 
the dog, the innumerable varieties which the species present, and its 
valuable qualities, natural or acquired, all tend to prove that it was 

1 Adapted from Man before Metals, pp. 256-59. (D. Appleton & Co.) 



THE PROBLEM OF AGRICULTURAL ECONOMICS 21 

one of the earliest companions of man, whom it has never since 
abandoned, whom it has everywhere followed. 
Townsend has said: 

The dog is the greatest conquest man ever made, if M. Buffon will 
allow me to say so. The dog is the first element in human progress. With- 
out the dog man would have been condemned to vegetate eternally in the 
swaddling clothes of savagery. It was the dog that effected the passage 
of human society from the savage to the patriarchal state, in making pos- 
sible the guardianship of the flock. Without the dog there could be no 
flocks and herds; without the flock there is no assured livelihood, no leg 
of mutton, no roast beef, no wool, no blanket, no time to spare; and, 
consequently, no astronomical observations, no science, no industry. 

There is a great deal of truth in this ingenious trifling. Once sub- 
jected to the all-powerful influence of man, aided by the dog, and 
transported by him into all climates, our animals, slaves at first, and 
at last domestic, have undergone in the successive ages a series of 
modifications in outward form, size, and the proportions of their 
limbs, in their fur and skin, in their interior organs and their functions, 
in their instincts and intelligence. The history of these wonderful 
and almost infinite varieties has been treated by a master hand in 
Darwin's important work, Animals and Plants under Domestication. 
This book shows how far the power of man over animated nature can 
extend; it treats of the infinite varieties of breeds of dogs, horses, 
oxen, sheep, pigs, fowls, pigeons, etc., which man has created, and 
still creates, for use or to gratify his caprice. Compare the New- 
foundland dog with the King Charles spaniel; the Arab horse, so 
swift in its course, with the heavy but powerful dray horse; the bison 
of America, with its monstrous head, with our Breton or Alderney 
cow; the ancona sheep of Massachusetts with the Leicester or merino 
breed, and say whether man is not also a creator. The list would be 
endless if we came to consider the instincts acquired or lost, the 
fecundity increased or diminished, the diet completely changed, the 
acclimatization and naturalization of exotic species, etc. 

The greater number of our domestic animals, commonly regarded 
as originally natives of Central Asia, are on the contrary of European 
origin. Their primitive stock, whether single or multiple, goes back 
in the case of many of them to a remote geological antiquity ; that is 
to say, at least as far as the fourth epoch. Of course, this same 
original stock may exist no longer, except in a fossil state. That of 
the dog, of the horse, of the ox, etc., are cases in point. We are so 



22 AGRICULTURAL ECONOMICS 

accustomed to look to the East for the solution of similar problems 
that we forget what lies near at hand and may furnish a simpler 
explanation. We do not, however, deny that several species or 
varieties, very similar to our own domestic ones, may have come to 
us from the East, and have formed half-breeds and different varieties 
by mingling with the breeds already existing in Europe. A few 
animals only came to us from Africa and a few have been imported 
from America at a comparatively recent epoch. These are the 
guinea-pig, the turkey, the musk duck, the Canada goose, and the 
cochineal from Nepal. 

Note. — More recent and more detailed treatment of this theme 
may be found in the Twenty- seventh Annual Report of the Bureau of 
Animal Industry (see p. 125 and p. 187). In the first of these articles, 
Professor J. Cossar Ewart presents evidence that "the turbary sheep, 
which seems to have accompanied Neolithic man in all his wanderings, 
was evolved in Turkestan from the native wild urial, that from Tur- 
kestan it found its way into Europe, where it was widely distributed 
in prehistoric times. It was characterized by thin tall legs and horns 
like a goat, but there existed also a sheep with large curved horns 

and a four-horned sheep Professor Fairfield Osborn says that 

British shorthorn cattle are descended from an indigenous occidental 
race, domesticated in Europe by the Neolithic man. While the 
naturalists as a rule agree that the urus was the only wild ox in 
Europe and that an eastern derivation of European cattle is in the 
highest degree improbable, some believe our modern breeds are 

descended from varieties originally domesticated in Asia In 

England and America many naturalists now believe (1) that domestic 
horses have sprung from several wild species probably connected by 
several lines of descent with three-hoofed species of the Miocene 
period, and (2) that while some of the wild ancestors were adapted 
for living in the vicinity of forests and upland valleys, others were 
adapted for a steppe, plateau, or desert life. The small, stout horse 
of the ancient Germans is doubtless a true forest type, and it is prob- 
able that all modern dray horses with round hind quarters have 
inherited their upright shoulders, large cannon bones, and low-set-on 
tail from forest ancestors. The plateau or desert type was distin- 
guished for speed, and this quality we see preserved in the desert 
Arab strain, and through Barb and Arab blood has contributed to the 
making of the modern English race horse. The horse of the steppe 
type had a remarkable ability to clear obstacles when alarmed or when 



1 



THE PROBLEM OF AGRICULTURAL ECONOMICS 23 

in search of fresh pastures. Probably Irish hunters are mainly 
indebted to ancestors of this type for their remarkable leaping powers. 
A fourth type should be added-^-a horse quite fifteen hands high, in 
build not unlike the modern race horse, fleet but probably character- 
ized by an indomitable disposition. This Siwalik type derives his 
name from the fact that it appeared among the Siwalik Hills of India, 
and it is the oldest known true horse." — Editor. 

2. THE BEGINNINGS OF PLANT CULTIVATION 1 
By A. P. de CANDOLLE 

In the progress of civilization the beginnings are usually feeble, 
obscure, and limited. There are reasons why this should be the case 
with the first attempts at agriculture or horticulture. Between the 
custom of gathering wild fruits, grain, and roots and that of the regu- 
lar cultivation of the plants which produce them there are several 
steps. A family may scatter seeds around its dwelling, and provide 
itself the next year with the same products in the forest. Certain 
trees may exist near a dwelling without our knowing whether they 
were planted, or whether the hut was built beside them in order to 
profit by them. War and the chase often interrupt attempts at cul- 
tivation. Rivalry and mistrust cause the imitation of one tribe by 
another to make but slow progress. If some great personage com- 
mand the cultivation of a plant, and institute some ceremony to show 
its utility, it is probably because obscure and unknown men have pre- 
viously spoken of it, and that successful experiments have already 
been made. A longer or shorter succession of local and short-lived 
experiments must have occurred before such a display, which is cal- 
culated to impress an already numerous public. It is easy to under- 
stand that there must have been determining causes to excite these 
attempts, to renew them, to make them successful. 

The first cause is that such or such a plant, offering some of those 
advantages which all men seek, must be within reach. The lowest 
savages know the plants of their country; but the example of the 
Australians and Patagonians shows that if they do not consider them 
productive and easy to rear, they do not entertain the idea of culti- 
vating them. Other conditions are sufficiently evident: a not too 
rigorous climate; in hot countries, the moderate duration of drought; 

1 Adapted from The Origin of Cultivated Plants, pp. 1-7, 325. (D. Appleton 
& Co.) 



24 AGRICULTURAL ECONOMICS 

some degree of security and settlement; lastly, a pressing necessity, 
due to insufficient resources in fishing, hunting, or in the production 
of indigenous and nutritious plants; such as the chestnut, the date- 
palm, the banana, or the breadfruit tree. When men can live without 
work it is what they like best. Besides, the element of hazard in 
hunting and fishing attracts primitive, and sometimes civilized, man 
more than the rude and regular labor of cultivation. 

I return to the species which savages are disposed to cultivate. 
They sometimes find them in their own country, but often receive 
them from neighboring peoples more favored than themselves by 
natural conditions, or already possessed of some sort of civilization. 
When a people is not established on an island, or in some place diffi- 
cult of access, they soon adopt certain plants, discovered elsewhere, 
of which the advantage is evident, and are thereby diverted from the 
cultivation of poorer species of their own country. History shows 
us that wheat, maize, the sweet potato, several species of the genus 
Panicum, tobacco, and other plants, especially annuals, were widely 
diffused before the historical period. These useful species opposed 
and arrested the timid attempts made here and there on less produc- 
tive or less agreeable plants. And we see in our own day, in various 
countries, barley replaced by wheat, maize preferred to buckwheat 
and many kinds of millet, while some vegetables and other cultivated 
plants fall into disrepute, because other species, sometimes brought 
from a distance, are more profitable. The difference in value, how- 
ever great, which is found among plants already improved by culture 
is less than that which exists between cultivated plants and others 
completely wild. Selection, that great factor which Darwin has had 
the merit of introducing so happily into science, plays an important 
part when once agriculture is established; but in every epoch, and 
especially in its earliest stage, the choice of species is more important 
than the selection of varieties. 

The various causes which favor or obstruct the beginnings of 
agriculture explain why certain regions have been for thousands of 
years peopled by husbandmen, while others are still inhabited by 
nomadic tribes. It is clear that, owing to their well-known qualities 
and to the favorable conditions of climate, it was at an early period 
found easy to cultivate rice and several leguminous plants in Southern 
Asia, barley and wheat in Mesopotamia and in Egypt, several species 
of Panicum in Africa, maize, the potato, the sweet potato, and manioc 
in America. Centers were thus formed whence the most useful 



THE PROBLEM OF AGRICULTURAL ECONOMICS 25 

species were diffused. In the north of Asia, of Europe, and of America 
the climate is unfavorable and the indigenous plants are unproduc- 
tive; but as hunting and fishing offered their resources, agriculture 
must have been introduced there late, and it was possible to dispense 
with the good species of the south without great suffering. It was 
different in Australia, Patagonia, and even in the south of Africa. 
They were out of reach of the plants of the temperate region in our 
hemisphere, and the indigenous species were very poor. It is not 
merely the want of intelligence or security that has prevented the 
inhabitants from cultivating them. Europeans established in these 
countries for a hundred years have cultivated only a single species, 
and that an insignificant green vegetable. 

In spite of the obscurity of the beginnings of cultivation in each 
region, it is certain that they occurred at very different periods. One 
of the most ancient examples of cultivated plants is in a drawing 
representing figs, found in Egypt in the pyramid of Gizeh — probably 
four thousand years old. This people must then have had an estab- 
lished agriculture dating back some centuries at least. Agriculture 
appears to be as ancient in China as in Egypt, and the constant rela- 
tions between Egypt and Mesopotamia lead us to suppose that an 
almost contemporaneous cultivation existed in the valleys of the 
Euphrates and the Nile. 

The ancient Egyptians and the Phoenicians propagated many 
plants in the region of the Mediterranean, and the Aryan nations, 
whose migrations toward Europe began about 2500, or at latest 
2000, B.C., carried with them several species already cultivated in 
Western Asia. Some plants were probably cultivated in Europe and 
in the north of Africa prior to the Aryan migration. This is shown 
by names in languages more ancient than the Aryan tongues; for 
instance, Finn, Basque, Berber, and the speech of the Guanchos of 
the Canary Isles. However, the remains, called kitchen middens, of 
ancient Danish dwellings have hitherto furnished no proof of culti- 
vation or any indication of the possession of metal. This absence of 
metals does not in these northern countries argue a greater antiquity 
than the age of Pericles, or even the palmy days of the Roman repub- 
lic. Later, when bronze was known in Sweden — a region far removed 
from the then civilized countries — agriculture had at length been 
introduced. Among the remains of that epoch was found a carving 
of a cart drawn by two oxen and driven by a man. The ancient 
inhabitants of Eastern Switzerland, at a time when they possessed 



26 AGRICULTURAL ECONOMICS 

instruments of polished stone and no metals, cultivated several plants, 
some of which were of Asiatic origin. The remains of the lake- 
dwellers of Austria prove likewise a completely primitive agriculture : 
no cereals have been found at Laybach and only a single grain of wheat 
at the Mondstee. The backward condition of agriculture in this 
eastern part of Europe is contrary to the hypothesis, based on a few 
words used by ancient historians, that the Aryans sojourned first in 
the region of the Danube. In spite of this example, agriculture 
appears in general to have been more ancient in the temperate parts 
of Europe than we should be inclined to believe from the Greeks, who 
were disposed to attribute the origin of all progress to their own 
nation. 

In America agriculture is perhaps not quite so ancient as in Asia 
and Egypt, if we are to judge from the civilization of Mexico and 
Peru, which does not date even from the first centuries of the Chris- 
tian era. However, the widespread cultivation of certain plants, 
such as maize, tobacco, and the sweet potato, argues a considerable 
antiquity, perhaps two thousand years or thereabouts. History is at 
fault in this matter and we can only hope to be enlightened by the 
discoveries of archaeology and geology. 

Men have not discovered and cultivated within the last two 
thousand years a single species which can rival maize, rice, the sweet 
potato, the potato, the breadfruit, the date cereals, millets, sorghums, 
the banana, soy. These date from three, four, or five thousand years, 
perhaps even in some cases six thousand years. The species first cul- 
tivated during the Graeco-Roman civilization and later, nearly all 
answer to more varied or more refined needs. A great dispersion of 
the ancient species from one country to another took place, and at 
the same time a selection of the best varieties developed in each 
species. The introductions within the last two thousand years took 
place in a very irregular and intermittent manner. I cannot quote 
a single species cultivated for the first time after that date by the 
Chinese, the greatest cultivators of ancient times. The peoples of 
Southern and Western Asia innovated in a certain degree by culti- 
vating the buckwheats, several cucurbitaceae, a few alliums, etc. In 
Europe, the Romans and several peoples in the Middle Ages intro- 
duced the cultivation of a few vegetables and fruits, and that of 
several fodders. In Africa, a few species were then first cultivated 
separately. After the voyages of Vasco da Gama and of Columbus a 
rapid diffusion took place of the species already cultivated in either 



THE PROBLEM OF AGRICULTURAL ECONOMICS 27 

hemisphere. These transports continued during three centuries with- 
out any introduction of new species into cultivation. We must come 
to the middle of the present century to find new cultures of any value 
from the utilitarian point of view, such as the Eucalyptus globulus of 
Australia and the Cinchonas of South America. From these data and 
reflections it is probable that at the end of the nineteenth century 
men will cultivate on a large scale and for use about three hundred 
species. This is a small proportion of the one hundred and twenty 
or one hundred and forty thousand in the vegetable kingdom; but 
in the animal world the proportion of creatures subject to the will of 
man is far smaller. There are not perhaps more than two hundred 
species of domestic animals — that is, reared for use — and the animal 
kingdom reckons millions of species. Doubtless the number of species 
of animals and vegetables which may be reared or cultivated for 
pleasure or curiosity is very large : witness menageries and zoological 
and botanical gardens. But I am speaking here of useful plants and 
animals in general and customary employment. 

B. The Pastoral Stage 

3. THE FLOCKS AND HERDS OF PALESTINE 
Gen. 13:1-12 

And Abram went up out of Egypt, he, and his wife, and all that 
he had, and Lot with him, into the south. And Abram was very rich 
in cattle, in silver, and in gold. And he went on his journeys from the 
south even to Beth-el, unto the place where his tent had been at the 
beginning, between Beth-el and Hai; unto the place of the altar, 
which he had made there at the first: and there Abram called on the 
name of the Lord. And Lot also, which went with Abram, had flocks, 
and herds, and tents. And the land was not able to bear them, that 
they might dwell together: for their substance was great, so that they 
could not dwell together. And there was a strife between the herd- 
men of Abram's cattle and the herdmen of Lot's cattle: and the 
Canaanite and the Perizzite dwelt then in the land. And Abram said 
unto Lot, Let there be no strife, I pray thee, between me and thee, 
and between my herdmen and thy herdmen; for we be brethren. Is 
not the whole land before thee? separate thyself, I pray thee, from 
me: if thou wilt take the left hand, then I will go to the right; or if 
thou depart to the right hand, then I will go to the left. And Lot 
lifted up his eyes, and beheld all the plain of Jordan, that it was well 



28 AGRICULTURAL ECONOMICS 

watered every where, before the Lord destroyed Sodom and Gomorrah, 
even as the garden of the Lord, like the land of Egypt, as thou comest 
unto Zoar. Then Lot chose him all the plain of Jordan; and Lot 
journeyed east: and they separated themselves the one from the 
other. Abram dwelt in the land of Canaan, and Lot dwelt in the 
cities of the plain, and pitched his tent toward Sodom. 1 

4. EARLY PASTORAL LIFE IN NORTHERN EUROPE 3 
By WILLIAM CUNNINGHAM 

The earliest evidence which we possess in regard to those Germans 
among whom the English tribes were included dates from a time when 
they had not completely emerged from a nomadic state; apart from 
this direct evidence we might have inferred on general grounds that 
they must have pursued a pastoral life at some period. The economy 
of any tribes who lived in the distant home of the Aryan race must 
have been of this character, while the wandering of tribes — not the 
incursion of a horde of conquerors — is scarcely intelligible unless we 
suppose them accompanied by their flocks and herds. One most 
important occasion for the wandering of these tribes must have been 
a lack of fodder, and they would take the direction which presented 
the least obstacles to their continued livelihood from their herds. 
Level plains and river courses would offer favorite lines of progress; 
while the rapid multiplication, which seems to have continued in the 
regions from which they came, would always urge an onward move- 
ment. But at length they would find themselves opposed by obstacles 
which prevented any farther advance; there were no means of trans- 
port by which a nomadic people could convey their herds across the 
German Ocean, while the Roman armies prevented the farther prog- 
ress of the barbarian tribes, as tribes. In some such way as this the 
English were forced to settle down on the strip of land in Frisia, where 
they were sooner or later compelled to eke out their subsistence from 
their herds by means of tillage, and from which they subsequently 
emerged to conquer Britain. 

1 It is evident that beginnings of settled agriculture were made at an early- 
day. Even upon the occasion of the visit of Abraham's servant seeking a wife 
for Isaac, the maid at the well says: "We have both straw and provender enough 
and room to lodge in." References to the threshing of grain, the cultivation of 
vineyards, and the care of olive trees are also numerous in the Old Testament. 
— Editor. 

2 Growth of English Industry and Commerce, pp. 28-30. (Cambridge Univer- 
sity Press.) 



THE PROBLEM OF AGRICULTURAL ECONOMICS 29 

From the descriptions which we read of nomadic peoples in the 
present day, we can form a fairly clear idea of the economy of similar 
tribes long ago. In the management of the herd, in successful breed- 
ing and training, there is opportunity for the constant exercise of 
forethought and skill. The land over which the cattle range is not 
appropriated. Each family, however, possesses its own herd; and 
there may also be an understanding, for mutual convenience, between 
two septs or families, as to the runs which their cattle are to occupy 
respectively. When we bear in mind these facts as to the general 
character of such tribes, we shall be in a better position for interpreting 
the hints which Caesar gives us in regard to some matters of detail. 

They were, as he tells us, mostly occupied with hunting and 
warfare, and they derived subsistence from their herds and the spoils 
of the chase; but they hardly devoted themselves to agriculture at 
all. Under these circumstances it is quite clear that the assignment 
of land which Caesar describes must either have been forest for game 
or pasturage for cattle; in any case, it was waste land they wished to 
use, as they could have little interest in securing possession of fields 
that were suitable for tillage. What they wished to have was the 
right to use a well-stocked waste, and the lands thus assigned were 
common to the members of a particular family or sept for the time 
being, and were not held in severalty. 



C. Agricultural Development of the Ancient Nations 

5. GREEK HUSBANDRY 1 
By PERCY GARDNER and F. BYRON JEVONS 

The Achaeans, as they come before us in the Homeric poems, are 
rather a pastoral than an agricultural race. It is in their herds of 
cattle, sheep, and swine, rather than in the produce of their lands, 
that the wealth of the heroic kings consisted. It was cattle which 
furnished them with a measure of value; and cattle, together with 
slaves, were the most valuable spoil which they secured in their mili- 
tary and piratical expeditions. Thucydides traces the same lines as 
Homer. In early times, he tells us, the insecurity of property was 
too great to allow of the planting of trees, which would of course lie 
at the mercy of an invading enemy. And although men tilled the 

1 Adapted from Manual of Greek Antiquities, pp. 370-76. (Copyright by- 
Charles Griff en & Co., Ltd., London.) 



SO AGRICULTURAL ECONOMICS 

ground, the harvest would very often fall to the foe, whereas cattle 
could on an alarm be driven to a place of safety. We read of kings' 
sons who were herdsmen and shepherds, such as Paris and Gany- 
medes and Anchises. In some instances, too, they are represented as 
engaged in agriculture. In the stately scenes of the Homeric shield, 
while the reapers cut and bind the corn the master stands by, leaning 
on his staff and rejoicing in his heart. But the aged Laertes, father 
of Odysseus, is found by that hero clad in skins labouring in digging 
his own land. And the story goes that when the chiefs came to fetch 
Odysseus himself to the war against Troy they found him, like Cin- 
cinnatus, occupied in ploughing. 

It is probable that the downfall of the Achaean race was followed 
by a time of greater simplicity, when the aristocracy of the Greek 
tribes lived on their estates in the midst of slaves and retainers, as did 
the wealthy inhabitants of Elis even in the time of the Achaean 
League. But Greek civic life began to develop with irresistible 
attraction. The rich thronged into cities, and left the work of their 
farms to bailiffs and slaves. There were in particular two states 
wherein the country life fell into the background — Athens and Sparta. 
But even at Athens, although the witty and luxurious citizens ridi- 
culed the yeoman as a lout, they could not deny his solid virtues. 

In the rural life of Greece we find traces of archaic customs which 
belonged to the entire Aryan race. The house, together with the 
field surrounding it, which was marked off by terminal stones, was 
the original domain of the self-contained Aryan family, within which 
the head of each family was supreme. Hence the possession was long 
considered necessary for the citizen, and always until the present day 
property in land has been more highly valued and has conferred 
greater distinction than any other class of wealth. 

As a whole, Greece is a country by no means favourable to agri- 
culture. The country is mostly rocky, barren, and uneven, especially 
unsuited for large farms. The system of farming was that adapted 
to peasant proprietors or yeomen. There can be no doubt that agri- 
culture in Attica suffered more and more as time went on, though to 
a less degree than that of Italy in imperial times, from the competi- 
tion of richer soils. Great cargoes of corn from Egypt and Sicily and 
the Black Sea constantly arrived in the Piraeus, and the people of 
Athens learned the fatal lesson that it was easier to buy agricultural 
produce with money wrung from the allies or extracted from the mines 
of Laurium than to grow it on the rugged soil around Athens. Grass- 



THE PROBLEM OF AGRICULTURAL ECONOMICS 31 

lands in Greece were mostly used for pasture, and not kept for hay. 
With regard to their live stock, the Greeks from very early times took 
pains with the breed, and endeavored to improve it. Thus we hear 
that Polycrates imported into Samos sheep from Athens and Miletus, 
and dogs from Lacedaemon and Epirus. The horse was not used for 
purposes of farming, and was at all times somewhat scarce in Greece. 
Oxen, sheep, and goats found abundant pasture in early times in 
Greece. The shepherds were very numerous in proportion to the 
sheep they tended, one to fifty, or at least one to a hundred, the 
labour of slaves being very cheap and very ineffective. 

6. CONTEMPORARY ACCOUNTS OF ROMAN FARMING 
a) By MARCUS PORCIUS CATO 1 

In buying a farm, notice how many wine presses and jars there 
are; where they are lacking one can infer what yield there is. How- 
ever, it is not the amount of equipment but what is accomplished with 
it that counts. Where there are few implements the farm will not 
be expensive to operate. One should realize that with a farm not 
less than with a man, no matter how much it produces, little gain will 
be left if the farm has a habit of spending. 

If you have bought a farm of one hundred jugera, in the best loca- 
tion, it should be planted as follows: first a vineyard, if it promises 
to yield well, second a watered garden, third an osier bed, fourth an 
olive orchard, fifth a meadow, sixth a grain field, seventh a woodlot, 
eighth a cultivated orchard, and ninth an acorn grove. 

As a young man, the farm-owner should plant his land with care, 
but build only after long reflection. Planting does not require 
reflection but action. When you have reached the age of thirty-six, 
then you should build if you have a farm well planted. In building, 
do not let the farmhouse be insufficient for the farm, or the farm for 
the house. The farm-owner should have his country home well 
built, with oil and wine cellar, and many jars, so that he may wait 
for the highest price; a home, in short, which will be to your profit, 
your credit, and your reputation. 

When the owner has come to the farmhouse and has greeted the 
household, he should go over the farm that same day if possible; other- 
wise, the next day. When he finds how the work of cultivation has 
gone, what tasks are done, what undone, he should call the overseer 

1 Adapted from De agricultura, \, ii, iii. 



32 AGRICULTURAL ECONOMICS 

the next day and ask him what work has been done, what remains 
to do; whether enough has been accomplished for the time spent, and 
whether he can get the rest done; also what has been harvested of 
vine, grain, and all the other crops. When there have been rain 
storms, see how many days, and what work could have been done 
in this stormy time : washing and pitching the wine jars, cleaning the 
barn, transferring grain, carrying out the manure and making com- 
post heaps, cleaning the seed, mending old ropes and making new — 
and the slaves should have mended their own rough garments and 
hoods. On feast days the old ditches could have been repaired, the 
public road worked, brambles cut down, the garden spaded, the 
meadow cleaned, withes bound, thorn-hedges trimmed, the coarse 
meal ground, and cleaning done generally. (Not so much cooked 
food should be given the slaves as when they are working in good 
weather in open fields.) Then take account of money on hand, grain, 
and what has been got for fodder; have a reckoning as to wine and 
oil, what has been sold, what profit it has made, what remains on 
hand, and what is ready, for sale. He should sell the oil if he can get 
his price, and the wine and grain left over. Let him sell the old oxen, 
the blemished cattle and sheep, the wool, hides, old wagons and iron 
tools, old and sick slaves, and whatever else is superfluous. The 
farm-owner should be a seller, not a buyer. 

b) By MARCUS TERENTIUS VARRO 2 

When we had sat down Agrasius said, "You who have travelled 
through many lands, have you seen any better cultivated than 
Italy ?" "I think at least," said Agrius, "that there is none so com- 
pletely cultivated. What useful product is there that does not grow, 
or more, grow at its best in Italy ? What spelt shall I compare with 
the Campanian ? What wheat with the Apulian ? What wine with 
that from Falernum, or oil with that of Venafrum ? Is not Italy so 
planted with trees that it all seems one orchard ? 

"Two things in particular Italians seem to consider in farming, 
whether enough crops can be raised in proportion to the expense and 
labor, and whether the place is healthful or not. Anyone who neglects 
either of these points and wants to cultivate the place nevertheless 
is insane, and should be handed over to his kinsman and family, for 

2 Adapted from Rerum rusticarum libri tres, Book i, chaps. 2, 3, 4, 22; Book ii, 
chap. 1. For both these Latin translations the editor is indebted to Dr. J. Leonard 
Hancock, of the Department of Ancient Languages of the University of Arkansas. 



THE PROBLEM OF AGRICULTURAL ECONOMICS 33 

no sane man should be willing to put outlay and expense upon care 
of a farm if he sees that he cannot get a return or, though he can get 
returns, if he sees that these are likely to be lost by reason of a bad 
climate." 

"First," said Scrofa, "we must decide whether only things 
planted in the ground are included in agriculture, or also those which 
are driven into the country, as sheep and cattle." 

"Well," said Stolo, "grazing in general, which is joined by many 
with agriculture, seems to me to belong to the shepherd rather than 
the farmer. And so the men put in charge of the respective tasks 
are called by different names even, for one is called a farm-er, the 
other a herds-man. The farmer [vilicus] is put there to cultivate the 
ground and is named from the farmhouse [villa], since to this he takes 
the crops and from this they are carried when they are sold." 

"Certainly," said Fundanius, "grazing and agriculture are differ- 
ent things, but related, just as the right pipe of the tibia is different 
from the left, yet is in a manner joined with it, since the one 
carries the air, the other gives the accompaniment of the same 
song." 

"And indeed you might add," said I, "that the shepherd's life 
carries the lead and the farmer's furnishes the accompaniment, and 
this on the authority of a very learned man, Dicaearchus, who in 
describing the life of Greece from its beginnings tells us that in early 
times men led the life of shepherds and did not know even how to 
plough the ground or plant trees or prune them. A step lower in the 
descent of life agriculture was begun; and so it played a second part 
to the shepherd life, because it is lower, or later, as the left pipe 
is lower than the openings of the right. 

"First of all, agriculture is not only an art, but one essential and 
important. It is the knowledge of what must be sowed and culti- 
vated in every field, and how the land may continually produce the 
greatest crops. The elements on which it is based are the same that 
Ennius says are those of the universe — water, earth, air, and sun. 
These elements must be considered before you put in your seed, which 
gives the beginning of fruitage. Starting from this, farmers should 
work toward two goals — utility and pleasure. The one seeks profit, 
the other enjoyment; but he should give first place to that which is 
useful above that which offers pleasure. 

"Never buy any of the utensils which can be made on the farm 
by the servants. Tools which cannot be produced on the estate, if 



34 AGRICULTURAL ECONOMICS 

they are bought with an eye to usefulness rather than beauty, will 
not by their cost dimmish your profit. Cato writes that the man 
who has an olive orchard of 240 jugera should arrange to use five sets 
of tools and receptacles for oil, which he enumerates in detail — as those 
of bronze, kettle, pitchers, and pots; those of wood and iron, as. 
three large wagons, six ploughs with their shares, four manure boxes, 
and the like; and of iron implements the kind and the number neces- 
sary, as eight pitchforks, the same number of hoes, half as many 
shovels, etc. He gives another rule for implements in a vineyard: 
if it be one hundred jugera, one should have on hand three sets of 
tools for the winepress, covered jars to hold 800 cullei, twenty grape 
hampers, twenty grain hampers, and other things of this sort. Others, 
indeed, advise less of these, but I think he gave so large a number of 
cullei so that one would not be compelled to sell the wine each year. 
For old wine is worth more than new and the same wine worth more 
at one time than another. 

"It is not without reason that those great men placed the Romans 
who lived in the country above those of the city. They thought that 
those who sat about in town were idlers compared with those who 
tilled the fields. Accordingly they so divided the year that only every 
eighth day did they tend to city business, leaving the other seven for 
work on the farm. As long as they kept up this practice they attained 
both ends, that of having farms very fruitful through careful cultiva- 
tion, and that of being themselves of sounder health and not needing 
the city gymnasiums of the Greeks. And so, since now for the most 
part our heads of families have crept within the city walls, leaving 
the pruning hook and the plough, and prefer to ply their hands in 
theater and circus rather than in the corn and the vines, we let out 
contracts for importing grain that we may get our fill from Africa and 
Sardinia, and we load our ships with the vintage of the islands Cos 
and Chios. Thus in the very land where shepherds, who founded the 
city, taught their children agriculture, there the children of these men 
in their greed have, in violation of laws, made cornfields into pasture, 
unaware that agriculture and pasturing are not the same. For shep- 
herd and ploughman are quite different, and even if he pastures his 
herd on farm land the herdsman is not the same as the ox-driver. 
Yet the connection between the two is close, because it is far more 
advisable for the farm-owner to use the fodder on the farm as pas- 
turage than to sell it, and because manure is best fitted for products 
of the earth and cattle are especially convenient for producing this. 



THE PROBLEM OF AGRICULTURAL ECONOMICS 35 

Hence the farm-owner should engage in both pursuits, agriculture 
and grazing and even that of pasturing animals for the hunt." 

"Well, then," said Scofa, "the science of breeding and feeding 
cattle means the getting as much profit as possible from them. Indeed, 
it is from them that money gets its name, for cattle [pecus] are the 
foundation of all wealth [pecunia]. This science has nine parts, which 
fall into three divisions : one having to do with smaller cattle, of which 
there are three kinds, sheep, goats, and swine; the second concerning 
larger cattle, which are also naturally divided into three kinds, cows, 
asses, and horses; the third involving those things in cattle breeding 
which are not raised to get a profit out of them, but because of the 

science or as a result of it, namely, mules, dogs, and shepherds 

The second point is a knowledge of the form of each kind of cattle; 
for it makes a great difference in the profit what sort each one is. So 
men buy cows with black horns rather than with white, large goats 
rather than small ones, and pigs with long bodies, provided they have 
small heads. The third point is the question of the strain to be 
desired. In this connection Arcadian asses are celebrated in Greece 
and those from Reate in Italy; so much so, indeed, that in my memory 
an ass went for 60,000 sesterces and a team-of-four at Rome were 
valued at four hundred thousand." 

D. The Middle Ages 

7. THE DISCOURAGEMENT OF AGRICULTURE IN EUROPE 
AFTER THE FALL OF THE ROMAN EMPIRE 1 

By ADAM SMITH 

When the German and Scythian nations overran the western 
provinces of the Roman Empire, the confusions which followed so 
great a revolution lasted for several centuries. The towns were 
deserted, and the country was left uncultivated; and the western 
provinces of Europe, which had enjoyed a considerable degree of 
opulence under the Roman Empire, sank into the lowest state of 
poverty and barbarism. During the continuance of those confusions, 
the chiefs and principal leaders of those nations acquired, or usurped 
to themselves, the greater part of the land of those countries. A 
great part of them was uncultivated; but no part of them, whether 
cultivated or uncultivated, was left without a proprietor. All of 
them were engrossed, and the greater part by a few great proprietors. 

1 Adapted from Wealth of Nations, Book III, chap. ii. 



36 AGRICULTURAL ECONOMICS 

The original engrossing of uncultivated lands, though a great, 
might have been but a transitory evil. They might soon have been 
divided again, and broken into small parcels, either by succession or 
by alienation. The law of primogeniture hindered them from being 
divided by succession; the introduction of entails prevented then- 
being broken into small parcels by alienation. 

It seldom happens, however, that a great proprietor is a great 
improver. In the disorderly times that gave birth to those barbarous 
institutions, the great proprietor was sufficiently employed in defend- 
ing his own territories, or in extending his jurisdiction and authority 
over those of his neighbours. He had no leisure to attend to the cul- 
tivation and improvement of land. When the establishment of law 
and order afforded him this leisure, he often wanted the inclination, 
and almost always the requisite abilities. If the expense of his house 
and person either equalled or exceeded his revenue, as it did very fre- 
quently, he had no stock to employ in this manner. If he was an 
economist, he generally found it more profitable to employ his annual 
savings in new purchases than in the improvement of his old estate. 
To improve land with profit, like all other commercial projects, 
requires an exact attention to small savings and small gains, of which 
a man born to a great fortune, even though naturally frugal, is very 
seldom capable. The situation of such a person naturally disposes 
him to attend rather to ornament, which pleases his fancy, than to 
profit, for which he has so little occasion. 

If little improvement was to be expected from such great pro- 
prietors, still less was to be hoped for from those who occupied the 
land under them. In the ancient state of Europe, the occupiers of 
land were all tenants at will. They were all, or almost all, slaves, but 
their slavery was of a milder kind than that known among the ancient 
Greeks and Romans, or even in our West Indian colonies. They 
were supposed to belong more directly to the land than to their master. 
They could, therefore, be sold with it, but not separately. They 
could marry, provided it was with the consent of their master; and 
he could not afterward dissolve the marriage by selling the man and 
wife to different persons. They were not, however, capable of acquir- 
ing property. Whatever they acquired was acquired to their master, 
and he could take it from them at pleasure. Whatever cultivation 
and improvement could be carried on by means of such slaves was 
properly carried on by their master. It was at his expense. The 
seed, the cattle, and the instruments of husbandry were all his. It 



THE PROBLEM OF AGRICULTURAL ECONOMICS 37 

was for his benefit. Such slaves could acquire nothing but their daily 
maintenance. It was properly the proprietor himself, therefore, that 
occupied his own lands and cultivated them by his own bondmen. 

But if great improvements are seldom to be expected from great 
proprietors, they are least of all to be expected when they employ 
slaves for their workmen. The experience of all ages and nations, I 
believe, demonstrates that the work done by slaves, though it appears 
to cost only their maintenance, is in the end the dearest of any. A 
person who can acquire no property can have no other interest but 
to eat as much and to labour as little as possible. Whatever work he 
does beyond what is sufficient to purchase his own maintenance can 
be squeezed out of him by violence only, and not by any interest of 
his own. To the slave cultivators of ancient times succeeded gradu- 
ally a species of farmers, known at present in France by the name of 
metayers. They have been so long in disuse in England that I know 
no English name for them at present. The proprietor furnished them 
with the seed, cattle, and instruments of husbandry — the whole stock, 
in short, necessary for cultivating the farm. The produce was divided 
equally between the proprietor and the farmer, after setting aside what 
was judged necessary for keeping up the stock, which was restored to 
the proprietor when the farmer either quitted or was turned out of the 
farm. Such tenants, being freemen, are capable of acquiring prop- 
erty; and having a certain proportion of the produce of the land, they 
have a plain interest that the whole produce should be as great as 
possible, in order that their own proportion may be so. It could 
never, however, be the interest, even of this last species of cultivators, 
to lay out, in the improvement of the land, any part of the little stock 
which they might save from their own share of the produce, because 
the landlord, who laid out nothing, was to get one-half of whatever it 
produced. The tithe, which is but a tenth of the produce, is found to 
be a very great hindrance to improvement. A tax, therefore, which 
amounted to one-half must have been an effectual bar to it. It might 
be the interest of the metayer to make the land produce as much as could 
be brought out of it by means of the stock furnished by the proprietor; 
but it could never be his interest to mix any part of his own with it. 

To this species of tenantry succeeded, though by very slow 
degrees, farmers, properly so called, who cultivated the land with 
their own stock, paying a certain rent to the landlord. When such 
farmers have a lease for a term of years, they may sometimes find it 
to their interest to lay out part of their capital for the further 



3& AGRICULTURAL ECONOMICS 

improvement of the farm, because they may sometimes expect to 
recover it, with a large profit, before the expiration of the lease. 

The proprietors of land were anciently the legislators of every 
part of Europe. The laws relating to land, therefore, were all calcu- 
lated for what they supposed the interest of the proprietor. It was 
for his interest, they had imagined, that no lease granted by any of 
his predecessors should hinder him from enjoying, during a long term 
of years, the full value of his land. Avarice and injustice are always 
shortsighted, and they did not see how much this regulation must 
obstruct improvement, and thereby hurt, in the long run, the real 
interest of the landlord. 

The farmers, too, besides paying the rent, were bound to perform 
a great number of services to the landlord; and public services to 
which the yeomanry were bound were not less arbitrary than the pri- 
vate ones. To make and maintain the highroads, a service which 
still exists, I believe, everywhere, though with different degrees of 
oppression in different countries, was not the only one. When the 
king's troops, when his household, or his officers of any kind passed 
through any part of the country, the yeomanry were bound to provide 
them with horses, carriages, and provisions, at a price regulated by 
the purveyor. The public taxes, to which they were subject, were as 
irregular and oppressive as the services. 

Under all these discouragements, little improvement could be 
expected from the occupiers of land. The ancient policy of Europe 
was, over and above all this, unfavourable to the improvement and 
cultivation of land, whether carried on by the proprietor or by the 
farmer; first, by the general prohibition of the exportation of corn, 
without a special license, which seems to have been a very universal 
regulation; and, secondly, by the restraints that were laid upon the 
inland commerce, not only of corn, but of almost every other part of 
the produce of the farm, by the absurd laws against engrossers, fore- 
stalled, and regraters, and by the privileges of fairs and markets. 

8. MANORIAL HUSBANDRY 1 

By ROWLAND E. PROTHERO 

The most primitive form of agriculture in England was that 
known as "wild field-grass" husbandry. Joint occupation and joint 
tillage were probably its characteristics. Fresh tracts of grass were 

1 Adapted from English Farming, Past and Present, pp. 2, 3, 8-18, 26. (Copy- 
right by Longmans, Green, & Co., London. Used by permission of the publisher.) 



THE PROBLEM OF AGRICULTURAL ECONOMICS 39 

successively taken in, ploughed, and tilled for corn. As the soil 
became exhausted, they reverted to pasture. Such a practice may 
belong to some portion of the Celtic race or to nomadic stages of 
civilization. 

This "wild field-grass" husbandry was displaced in most parts of 
England by the permanent separation of arable from pasture land. 
This fixed division of tillage and grass, introduced into this country 
possibly by people accustomed, like the Romans or the Anglo-Saxons, 
to a drier and less variable climate, became the basis of the agricul- 
tural organization of the mediaeval manor. On it also were founded 
the essential features of those village communities which at one time 
tilled two-thirds of the cultivated soil of England, survived the criti- 
cism of Fitzherbert in the sixteenth century, outlived the onslaught 
of Arthur Young in the eighteenth century, clung to the land in spite 
of thousands of enclosure acts, and were carried to the New World 
by the Pilgrim Fathers. 

The crops grown were, as winter seeds, wheat and rye, and, as 
spring seeds, oats, barley, beans, peas, or vetches. Flax, hemp, and 
saffron were locally raised in separate plots. Roots, clover, and 
artificial grasses were still unknown. Rotations of crops, as they are 
now understood, were therefore impossible. The soil was rested by 
fallowing the one-half, or the one-third, of the arable land, required 
by the two- or the three-course system. On the tenant's land, rye 
was the chief grain crop, and rye was then the breadstuff of the Eng- 
lish peasantry, as it still is in Northern Europe. Barley was the 
drink-corn, as rye was the bread-corn, of the Middle Ages. In the 
north, oats were extensively cultivated but they were gray-awned, 
thin, and poor. 

The ploughings were performed, and the teams supplied and 
driven, partly by the servants of the demesne, partly by the tenants. 
Sometimes ploughmen seemed to have been hired. The harrowings 
were similarly provided for, and the harrow, often a hawthorn tree, 
weighted on its upper side with logs, was supplied from the lords 
waste. Here also harrowers seem to have been sometimes specially 
hired. In this case they possibly provided their own home- 
constructed implements with sharp points or teeth like the modern 
type of harrow. When the fallows were first broken up, as was then 
the practice, in March, or when the land was prepared for barley, the 
ground was often so hard that the clods had to be subsequently 
broken. For this purpose the ploughman, holding the principal hale 



40 AGRICULTURAL ECONOMICS 

of the plough in his left hand, carried in his right a "clotting beetle," 
or "maul," such as that which is depicted in the Cotton MSS. A 
"Dover-court beetle" was a necessary tool in the days of Tusser; 
and Plot, whose Natural History of Oxfordshire appeared in the seven- 
teenth century, recommends its use after the land was harrowed. 

The amount of wheat, rye, beans, and peas usually sown to the 
acre was only two bushels; and of oats and, strangely enough, of 
barley, four bushels. The yield of wheat rarely exceeded fivefold, or 
ten bushels to the acre; that of leguminous crops ranged from three- 
to sixfold, or from six to twelve bushels to the acre; that of oats and 
barley varied from three- to fourfold, or from twelve to sixteen bushels 
to the acre. Considerable care was exercised in the choice and change 
of the seed-corn, which was often one of the produce-rents of the 
tenants. Wheat rarely followed a spring grain crop. The most 
important crops of the farm were the corn crops of wheat, rye, and 
barley, which were raised for human food and drink. For such ready 
money as he needed, the lord looked mainly to the produce of his 
live stock. For their consumption were grown the remaining crops — 
the hay, beans, peas, and oats; though oats were not only used 
for human food, but in some districts were brewed into inferior 
beer. 

Horse-farms appear in some estate accounts; but they probably 
supplied the "great horse" used for military purposes. As a rule, oxen 
were preferred to horses for farm work. Though horses worked more 
quickly when the ploughman allowed them to do so, they pulled less 
steadily, and sudden strains severely tested the primitive plough-gear. 
On hard ground they did less work, and only when the land was 
stony had they any advantage. Economical reasons further explain 
the preference for oxen. From St. Luke's Day (October 18) to April, 
both horses and oxen were kept in the stalls. During these twenty- 
five weeks, neither could graze, and Walter of Henley calculates that 
the winter-keep of a horse cost four times that of an ox. Horses 
needed more attendance; they required to be rubbed, curried, and 
dressed. Oxen were less liable to sickness than horses. The harness 
of the ox, mainly homemade from materials supplied on the estate, 
was cheaper to provide and repair. Shod only on the forefeet, the 
shoeing of the ox cost less than that of the horse. When either horse 
or ox was past work, the profit of the one lay in his hide; of the other, 
not in his hide, but the larder: the ox was "mannes meat when dead, 
while the horse is carrion." 



THE PROBLEM OF AGRICULTURAL ECONOMICS 41 

Cattle were seldom fatted even for the tables of the rich; oxen 
were valued for their power of draught, cows for their milk. It may, 
indeed, be said that fresh butcher's meat was rarely eaten, and that, 
if it was, it was almost universally grass-fed. No winter-keep or 
feeding stuff was available; not even carrots or parsnips were known. 
The commons, generally unstinted, carried as much stock as could 
keep skin and bone together in the winter, and the lord could not only 
turn on them his own sheep and cattle, but license strangers for money 
payments to do the same. Even if the commons were stinted, the 
margin was too bare to mean abundance. The best pastures were 
either in the lord's own hands, and were saved by him at the expense 
of the commons, or were let out to individuals in separate occupations. 
Even among these superior feeding-grounds, there were few enclosures 
which would fatten a bullock. At the wane of the summer the cattle 
had the aftermath of the hay meadows, and the stubble and haulm 
of the arable lands. During this season they were at their best. 
They only survived the winter months in a state of semi-starvation 
on hay, straw, and tree-loppings. It was, therefore, the practice at 
the end of June to draft the aged cows, worn-out oxen, and toothless 
sheep, or "crones," prepare them as far as possible for the butcher, 
slaughter them in the autumn, and either eat them fresh or throw 
them into the powdering tub to be salted for winter consumption. 

The dairy produce was a greater source of money revenue, though 
the home consumption of cheese must have been very large. But the 
management was necessarily controlled, like the management of the 
stock, by the winter scarcity. The yield of a cow during .the twenty- 
four weeks from the middle of April to Michaelmas was estimated at 
four-fifths of her total annual yield. 

Sheep were the sheet anchor of farming. But it was not for their 
mutton, or for their milk, or even for their skins, that they were 
chiefly valued. Already the mediaeval agriculturist took his seat on 
the wool-sack. As a marketable commodity, both at home and 
abroad, English long wool always commanded a price. It was less 
perishable than corn, and more easily transported even on the worst 
of roads. From Martinmas to Easter sheep were kept in houses, or 
in movable folds of wooden hurdles, thatched at the sides and tops. 
During these months they were fed on coarse hay or peas-haulm, mixed 
with wheaten or oaten straw. For the rest of the year they browsed on 
the land for fallows, in woodland pastures, or on the sheep-commons. 
Diseases made sheep-farming, in spite of its profits, a risky venture. 



42 AGRICULTURAL ECONOMICS 

Swine were the almost universal live stock of rich and poor. As 
consumers of refuse and scavengers of the village, they would, on 
sanitary grounds, have repaid their keepers. But mediaeval pigs 
profited their owners much, and cost them little. A pig was more 
profitable than a cow. For the greater part of the year pigs were 
expected to pick up their own living. When the wastes and wood- 
lands of a manor were extensive, they were, except during three 
months of the year, self-supporting. They developed the qualities 
necessary for taking care of themselves. The ordinary pigs of the 
Middle Ages were long, flat-sided, coarse-boned, lop-eared, omniver- 
ous animals, whose agility was more valuable than their early matur- 
ity. Growth and flesh were the work of time; so also were thickened 
skin, developed muscles, and increased weight of bone. The styes 
were often built in the woods, whence the pigs were brought to feed 
on the arable land only after the crops were cleared, or, at times of 
exceptional frost, to subsist on the leavings of the threshing-floor. 
During most months of the year they ranged the woods for roots, 
wild pears, wild plums, crab apples, sloes, haws, beech mast, and 
acorns. 

The poultry yard was under the care of the dairywoman, who 
sometimes seems to have had the poultry to farm at so much a head. 
Ducks are not mentioned in any of the mediaeval treatises on farming, 
though they appear in the Berkeley accounts of 132 1 ; guinea-fowl and 
turkeys were unknown. But the number of geese and fowls, and, on 
important estates, of peacocks and swans, was large, and it was 
swollen by the produce-rents, which were often paid in poultry and 
eggs. The author of Hosbonderie gives minute instructions as to the 
produce for which the dairywoman ought to account. "Each goose 
ought to have five goslings a year"; each hen was to answer for 
115 eggs and seven chickens. Besides the poultry yard, the dove- 
cote or pigeon-house was a source of profit to the lord and of 
loss to the tenant. Prodigious numbers of pigeons were kept. 
The privilege of keeping a pigeonhouse was confined to manorial 
lords and jealously guarded, and every manor had its dovecote. 
The story of the French Revolution shows how bitterly the 
peasants resented the plunder of their hard-earned crops by the 
lord's pigeons. 

On the outskirts of the arable fields nearest to the village lay one 
or more "hams" or stinted pastures, in which a regulated number of 



THE PROBLEM OF AGRICULTURAL ECONOMICS 43 

live stock might graze, and which therefore supplied superior feed. 
Besides the open arable fields, the meadows, and the stinted hams, 
there were the common pastures, fringed by the untilled wastes which 
were left in their native wildness. These wastes provided fern and 
heather for litter, bedding, or thatching; small wood for hurdles; 
tree-loppings for winter browse of live-stock; furze and turves for 
fuel; large timber for fencing, implements, and building; mast, 
acorns, and other food for the swine. Most of these smaller rights 
were made the subject of fixed annual payments to the manorial lord ; 
but the right of cutting fuel was generally attached to the occupation, 
not only of arable land, but of cottages. The most important part of 
these lands were the common pastures, which were often the only grass 
that arable farmers could command for their live stock. They there- 
fore formed an integral and essential part of the village farm. No 
rights were exercised upon them by the general public. On the con- 
trary, the commons were most jealously guarded by the privileged 
commoners against the intrusion or encroachments of strangers. The 
agistment of strange cattle or sheep was strictly prohibited; com- 
moners who turned out more stock than their proper share were 
"presented" at the manorial courts and fined; cottages erected on the 
commons were condemned to be pulled down; the area within which 
swine might feed was carefully limited, and the swine were to be 
ringed. Those who enjoyed grazing rights were the occupiers of 
arable land, whose powers of turning out stock were, in theory, pro- 
portioned to the area of their arable holdings, and the occupiers of 
certain cottages, which commanded higher rents in consequence of 
the privilege. It was on these commons that the cattle and sheep of 
the village were fed. Every morning the cattle were collected, prob- 
ably by the sound of a horn, and driven to the commons by the village 
herdsman along drift ways, which were inclosed on either side by 
movable or permanent fences to keep the animals from straying onto 
the arable land. In the evening they were driven back, each animal 
returning to its own shelter, as the herd passed up the village street. 
Similarly, the sheep were driven by the village shepherd to the com- 
mons by day, and folded at night on the wheat fallows. Sheep were 
the manure-carriers, and were prized as much for their folding quality 
as for their fleeces. During winter each commoner was obliged to 
find hay for his sheep and his own fold, the common shepherd penning 
and folding them so as gradually to cover the whole area. 



44 AGRICULTURAL ECONOMICS 

9. ORGANIZATION OF THE MANOR 1 
By W. J. ASHLEY 

Till nearly the end of the fourteenth century, England was a 
purely agricultural country. In the eleventh century, and long after- 
ward, the whole country, outside the larger towns, was divided into 
manors — into districts, that is to say, in each of which one person, 
called the lord, possessed certain important and valuable rights over 
all the other inhabitants. 

Let us picture to ourselves an eleventh-century manor in Middle 
or Southern England. There was a village street, and along each 
side of it the houses of the cultivators of the soil, with little yards 
around them; as yet there were no scattered farmhouses, such as 
were to appear later. Stretching away from the village was the 
arable land, divided usually into three fields, sown one with wheat 
or rye, one with oats or barley, while one was left fallow. The fields 
were again subdivided into what were usually called " furlongs," and 
each furlong into acre or half-acre strips, separated, not by hedges, 
but by "balks" of unploughed turf; and these strips were divided 
among the cultivators in such a way that each man's holding was 
made up of strips scattered up and down the three fields, and no man 
held two adjoining pieces. Each individual holder was bound to 
cultivate his strips in accordance with the rotation of crops observed 
by his neighbours. Besides the arable fields there were also meadows, 
enclosed for hay-harvest, and divided into portions by lot or rotation 
or custom, and after hay-harvest thrown open again for the cattle to 
pasture upon. In most cases there was also some permanent pasture 
or wood, into which the cattle were turned, either "without stint" or 
in numbers proportioned to the extent of each man's holding. 

In a manor the land was regarded as the property, not of the cul- 
tivators, but of a lord. It was divided into that part cultivated for 
the immediate benefit of the lord, the demesne or inland, and that 
held of him by tenants, the land m^villenage, the latter being usually 
three-fifths or two-thirds of the whole. The demesne consisted partly 
of separate closes, partly of acres scattered among those of the tenants 
in the common fields; and we may, later, see reason to believe that 
originally the lord's portion had consisted entirely of such scattered 
acres, with possibly a rather larger farmyard around his house than 

1 Adapted from An Introduction to English Economic History and Theory, 
pp. S-32. (Copyright by Longmans, Green, & Co., London. Used by permission 
of the publisher.) 



THE PROBLEM OF AGRICULTURAL ECONOMICS 45 

those of the rest of the villagers. Of the land held in villenage, far 
the greater part was held in whole or half virgates or yardlands. The 
virgate was a holding made up of scattered acre or half-acre strips in 
the three fields, with appurtenant and proportionate rights to meadow 
and pasture; and its extent, there can be no doubt, was usually thirty 
acres, although in some manors it was as few as sixteen, in others as 
many as forty-eight. The holders of such virgates or half-virgates 
formed a class socially equal among themselves, and all of them, in 
any particular manor, with the same obligations of service to the lord. 
They were known as villani, i.e., the "villagers" par excellence, and 
in the thirteenth century as virgarii, in English yardlings, while in the 
north they often bore the title husbands. Below these was the class 
of bordars and cotters, most of them holding only a cottage and one or 
two acres, though sometimes as many as five, eight, or ten acres — of 
course in the common fields. They seem to have been marked off 
from the villeins proper by not possessing oxen or plough; and prob- 
ably in many cases they were employed by the villeins. 

The whole of the land of the manor, both demesne and villenage, 
was cultivated on an elaborate system of joint labour. The only per- 
manent labourers upon the demesne itself were a few slaves; all or 
almost all the labour there necessary was furnished by the villeins and 
cotters, as the condition on which they held their holdings, and under 
the supervision of the lord's bailiff. At first sight bewildering in their 
complexity, the duties may readily be distinguished as falling under 
two main heads: (1) a man's labour for two or three days a week 
throughout the year, known as week-work or daily works; and (2) addi- 
tional labour for a few days at spring and autumn ploughing and at 
harvest time. On such occasions the lord frequently demanded the 
labour of the whole family, with the exception of the housewife. For 
these additional services the commonest English expressions were 
boon-days, loveboons, and bedrips (reaping specially bidden). Besides 
these, there were usually small quarterly payments to be made in 
money, and miscellaneous dues in kind, differing from manor to manor 
— so many hens and eggs, or so many bushels of oats at various 
seasons; as well as miscellaneous services, also differing in the differ- 
ent manors, of which the one most frequently mentioned is "carting." 
During the boon-days it was usual for the lord to feed the labourers ; 
and, in the later custumals, the precise definition of the days upon 
which they were and were not to be fed at the lord's expense, or, even 
more minutely, when they were to have drink and nothing else, when 



46 AGRICULTURAL ECONOMICS 

bread and no drink — a "dry repast" — when black bread, when white, 
when even meat, broth, and cheese, often enlivens the dull record 
with a gleam of humour. In one place, indeed, we are told that on 
the last two days of harvesting each labourer could bring a comrade 
to supper. 

Of the other side of village life — the labour of the tenants upon 
their own virgates — we have no knowledge; we can only conjecture 
that it also was carried on by a system of joint labour, each holder 
contributing oxen and men to the common ploughs, in proportion to 
his holding, probably also joining his fellows in mowing hay and reap- 
ing corn on some common plan. 

When we compare the comparative simplicity of Domesday Book, 
in which, over the greater part of England, villeins, cotters or borders, 
and slaves make up the whole of the population, with the elaborate 
division into six, eight, or even ten classes in the custumals of the 
latter part of the thirteenth century, the changes seem bewildering 
in their complexity and variety. But it will be found that most of 
them may be grouped under four heads: (i) the growth of a large 
class of free tenants; (2) the commutation of the week-work for 
pecuniary payments; (3) the commutation of the boon-days and 
other special services; and (4) the appearance of a class of men 
dependent wholly or in part on the wages they received for agricul- 
tural labour. 

1. The rapid increase in the number of free tenants after the 
Conquest is one of the most certain and important of facts. The 
larger number of those known by the name libre tenentes were, clearly, 
virgate-holding villeins or the descendants of such, who had commuted 
their more onerous labour services of two or three days a week for a 
fixed sum of money, and had been freed from what were regarded as 
the more servile " incidents" of their position. In some manors it 
was possible for the number of freeholdings to be raised by an increase 
in the extent of cultivated land. Near most of the villages was a 
stretch of "waste" land, covered with trees and bushes and used for 
common pasturage. As the increase of population strengthened the 
labour forces of the manor, it became the lord's interest to enclose 
portions of the waste, and either add them to his demesne or let them 
to the villagers. The grants seem almost invariably to have been 
small; cases in which they are as large as ten or twelve acres are very 
rare, and usually they are only five, four, three, or two acres, very 
frequently one acre or even one rood; and they were always let at 



THE PROBLEM OF AGRICULTURAL ECONOMICS 47 

money rents, and never subject to labour obligations. Among the 
names of the tenants of the essart, or clearance, we find many who 
held at the same time either virgates in free tenure or land in villenage; 
but probably in most cases the new holdings were given to the younger 
sons of tenants — especially cotters — who otherwise would have held 
no land at all. It was here, and on the demesne, that cottages and 
plots of land were found for the artisans, mostly weavers, who first 
show themselves in the thirteenth century. 

Hitherto all the freeholdings described were such as were created 
on the land held in villenage, or on land which the villeins had pre- 
viously held in common. Allusion, however, has already been made 
to tenants holding demesne land. The letting of portions of the 
demesne for money rents had in many instances taken place quite as 
early as any of the other changes which have been described. It has 
been seen that the whole organization of the manor was directed 
toward providing labour for the cultivation of that part which the 
lord kept in his own hands. It is therefore evident that if the lord 
found it to his interest to let portions of the demesne instead of culti- 
vating it through his bailiff or reeve, his need for the services of the 
villeins would be pro tanto diminished, and he would be the readier to 
accept commutation. The letting of the demesne would do more, 
then, than any other thing to change the relations between the lord 
and the villagers. But if, as may be naturally supposed, the renting 
of demesne land often meant only that a man who had previously 
been bound to cultivate certain acres, the lord taking the produce, 
now promised a certain fixed amount in return for whatever the pro- 
duce might chance to be, there would be absolutely no disturbance 
at all in the actual method of cultivation. 

2. In all the cases previously noticed the commutation of labour- 
dues for money had been accompanied by a rise from servile to free 
tenure. But from the beginning of the thirteenth century we notice 
a much more general and far-reaching change, the commutation of 
week-work, or even of all labour services, without the tenant being 
thereby raised to a free tenure. We find in many of the custumals 
of the thirteenth century that, even where the labour is not generally 
commuted, each item of^it — a day's work of each sort — is precisely 
valued, at a halfpenny, a penny, or the like. At first, probably, this 
was in order to assess the fines to be paid by a villein who neglected 
his due task. But very often the money would be more welcome 
than the labour; and in Fleta the reeve is directed to look carefully 



48 AGRICULTURAL ECONOMICS 

after arrears of labour, and to try to get money for them. This 
would naturally lead to the total money value of all the services being 
added up, and to commutation being effected by the more prosperous 
and ambitious villeins. Yet the lords were not equally indifferent 
with regard to all services, as to whether they received money or 
labour. The extra labourers needed at the busy seasons could not 
so easily be obtained for hire; and consequently we find that in most 
cases the lords retain the precariae and exceptional services long after 
the week-work has disappeared. Commutation was carried on very 
gradually over the country. In the middle of the thirteenth century 
it does not seem to have been effected in any case on the estates of 
Ramsey Abbey; nor was it, apparently, often the practice on the 
estates of Gloucester Abbey twenty years later, or of Battle Abbey 
even at the end of the century, though the value of the services is 
given in money. 

3. The more prosperous the free tenants and customary tenants 
became, the more eager they would be to get rid of the obligation of 
furnishing labour, even if only at certain seasons. This would be 
especially irksome for the smaller customary tenants and cotters, who 
might in many cases have to leave their own acres at the time when 
they were most anxious to attend to them. There would be a tend- 
ency, therefore, for all services to be commuted for money payments, 
with which the bailiff could hire labourers more easily controlled. 

4. Now it is evident that the lord would not have consented, first 
to partial and then to complete commutation, had he not been able 
to hire labourers either for regular service during the whole or part 
of the year, or at specially busy seasons. These changes, then, imply 
that a class of labourers had come into existence; a class of men, that 
is to say, who, although they undoubtedly often had pieces of land — 
even two or three acres — yet had not enough land to occupy their 
whole attention, and were partially dependent upon wages. But this 
body of labourers must as yet have been comparatively small. There 
are several lists extant of the permanent servants on a manor. They 
seem to have been few in number — a reaper, two or three ploughmen, 
a carter, a woodward or swineherd, one or two shepherds, one or two 
oxherds or cowherds, and a dairywoman. Some of these, such as the 
shepherds and oxherds, were probably descended from the slaves of 
the demesne; while the mesor, or reaper, seems to have been an officer 
little inferior to the reeve. It does not appear that commutation had 
the effect of greatly increasing the number of permanent hired servants 
on the demesne. 



THE PROBLEM OF AGRICULTURAL ECONOMICS 49 

10. THE SELF-SUFFICING CHARACTER OF THE MANOR 1 
By W. J. ASHLEY and R. E. PROTHERO 

In the Middle Ages agriculture was a self-supporting industry 
rather than a profit-making business. The fundamental character of 
the manorial group, regarded from the economic point of view, was 
its self-sufficiency , its social independence. Few of the necessaries of 
life were ever bought by the cultivators of the soil, and whether the 
corn that they raised was fetching 3s. or 6s. in a distant market made 
little difference to the inhabitants of the villages. They grew it for 
their own consumption. Owing to difficulties of communication, 
every village raised its own bread-supply. Hence a great extent of 
land, which from a farming point of view formed an excessive pro- 
portion of the total area, was tilled for corn, however unsuited it 
might be for arable cultivation. As facilities of transport increased, 
this necessity became less and less paramount. Land best adapted 
to pasture no longer required to be ploughed, but might be put to the 
use for which it was naturally fitted. Improvements in means of 
communication were thus among the changes which helped to extin- 
guish village farms. But for the time, and so long as the open-field 
system prevailed, farming continued to be in the main a self-sufficing 
industry. Except for the payment of rent, little coin was needed or 
used in rural districts. Parishes till the middle of the eighteenth cen- 
tury remained what they were in the thirteenth century — isolated and 
self-supporting. The inhabitants had little need of communication 
even with their neighbours, still less with the outside world. The 
fields and the live stock provided their necessary food and clothing. 
Whatever wood was required for building, fencing, and fuel was sup- 
plied from the wastes. 

Each village had its mill, and nearly every house had its oven and 
brewing kettle. Women spun and wove wool into coarse cloth and 
hemp or nettles into linen; men tanned their own leather. The 
rough tools required for cultivation of the soil and the rude house- 
hold utensils needed for the comforts of daily life were made at home. 
In the long winter evenings, farmers, their sons, and their servants 
carved the wooden spoons, the platters, and the beechen bowls. They 
fitted and riveted the bottoms to the horn mugs, or closed, in coarse 
fashion, the leaks in the leathern jugs. They plaited the osiers and 

1 Adapted from An Introduction to English Economic History and Theory, I, 
35-48, and English Farming, Past and Present, pp. 28-31. (Copyright by Long- 
mans, Green, & Co., London. Used by permission of the publisher.) 



So AGRICULTURAL ECONOMICS 

reeds into baskets and " weeles " for catching fish. They fixed handles 
to the scythes, rakes, and other tools; cut the flails from holly or 
thorn, and fastened them with thongs to the staves; shaped the teeth 
for rakes and harrows from ash or willow, and hardened them in the 
fire; cut out the wooden shovels for casting the corn in the granary; 
fashioned ox yokes and bows, forks, racks, and rack-staves; twisted 
willows into scythe-cradles, or into traces and other harness gear. 
The village "general shop" had not yet come into existence; in many 
places it did not appear until the present century, partly because 
many of the wants which it meets were not yet felt, partly because 
such wants as were felt were supplied either by journeys at long 
intervals to some distant fair or market, or by the labour of the 
family itself. 

Thus the inhabitants of an average English village went on — 
year in, year out — with the same customary methods of cultivation, 
living on what they produced, and scarcely coming in contact with 
the outside world. The immediate neighbourhood of large towns 
created markets for the surplus produce that remained after satisfy- 
ing the needs of the cultivators of the soil. But remoter villages con- 
tained neither buyers of produce nor pioneers of improvements. The 
very existence of towns, indeed, implied that the purely agricultural 
districts produced more than they required for their own consump- 
tion; and corn and cattle were regularly sent, even to distant markets, 
by lords of manors and their bailiffs, in increasing quantities as the 
great lords or corporations came to desire money payments instead 
of payments in kind. But the other dealings of the villagers with 
the outside world were few. 

It may be well to notice the non-existence in the village group of 
certain elements which modern abstract economics is apt to take for 
granted. Individual liberty, in the sense in which we understand it, 
did not exist; consequently, there could be no such complete compe- 
tition as we are wont to postulate. The payments made by the 
villeins are not rents in the abstract economist's sense: for the econo- 
mist assumes competition — assumes that landlord and farmer are 
guided only by commercial principles; that there is an average rate 
of profit, which the farmer knows; that he will not take less and can- 
not get more. However the labour services came to be fixed, they 
were fixed in the eleventh century; they remained unchanged till they 
were commuted for money; and, once commuted, no increase took 
place in the money rent. The chief thought of lord and tenant was, 



THE PROBLEM OF AGRICULTURAL ECONOMICS 51 

not what the tenant could possibly afford, but what was customary. 
And, finally, there was as yet no capital in the modern sense. Of 
course there was capital in the sense in which the word is defined 
by the orthodox economists — "wealth appropriated to reproductive 
employment"; for the villeins had ploughs, harrows, oxen, horses. 
But this is one of the most unreal of economic definitions. As has 
been well said, "by capital we habitually mean more than this; we 
mean a store of wealth which can be directed into new and more 
profitable channels as occasion arises. In this sense the villeins cer- 
tainly had no capital, and it was only gradually, as commutation 
began, that the landlord was getting to have something that he could 
"capitalize," i.e., that he could save with the intention of getting a 
profit from it by and by. 

Little as the mere substitution of money payments for labour- 
dues may seem to have affected the relations of classes, it marked the 
beginning of a change of supreme importance. The German econo- 
mist Hildebrand was the first to point out that whatever difference 
there may have been between the economic development of the differ- 
ent European nations, there is one characteristic common to all, the 
transition, namely, from payment in kind to payment in money. Such 
a way of phrasing it, indeed, but very inadequately represents what 
Hildebrand meant by the transition from Naturalwirthschaft to Geld- 
wirthschaft — the development of a society in which exchange, and 
the distribution of wealth generally, are effected by means of, or 
expressed in terms of, a metallic currency, from one in which land was 
given for service, service given for land, goods exchanged for goods, 
without the intervention of a currency at all. This change is what 
we see in all directions during these three centuries. 

In examining the character of the village group, we saw that in 
the eleventh century, and in most cases long afterward, the lord and 
his family lived upon the produce of his demesne, cultivated by the 
customary labour services of his tenants, and the tenants upon the 
produce of the lands which they held in return for such services ; and 
we have noticed how very gradually these services were exchanged 
for money, so that the lord should receive a rent with which he might 
hire wage-labourers. What is true of the several manorial groups 
was true also of the relations between the tenants and the seigncurial 
household in those cases where a lord held a great number of manors. 
The lords received from their bailiffs, not sums of money, but cer- 
tain amounts of agricultural produce, for the maintenance of their 



52 AGRICULTURAL ECONOMICS 

households. Markets where men might be confident of obtaining 
money for their wares, or of obtaining wares for their money, were 
scarcely known. 1 

E. The Agrarian Revolution 

ii. THE DECLINE OF FEUDALISM AND THE IMPROVEMENT 
OF AGRICULTURE 2 

By ROWLAND E. PROTHERO 

Under the condition which prevailed in the fourteenth and fif- 
teenth centuries, little advance in farming practices could be expected. 
Few of the baronial aristocracy verified the truth of the maxim that 
"the master's foot fats the soil." The strenuous idleness or the mili- 
tary ardours of youthful lords were generally absorbed in field sports 
and martial exercises: most of the lay barons rebelled against the 
minute and continuous labour of farming. 

There was little to mitigate either for men or beasts the horrors 
of winter scarcity. On land which was inadequately manured, and 
on which neither field-turnips nor clovers were known till centuries 
later, there could be no middle course between the exhaustion of 
continuous cropping and the rest-cure of barrenness. As with the 
land, so with its products. Famine trod hard upon the heels of feast- 
ing. Both for men and beasts the absolute scarcity of winter always 
succeeded the relative plenty of autumn. 

But with the decay of feudalism land came to be regarded as a 
source of income, not of military power. As landowning became a 
business and farming a trade, agricultural progress demanded less 
personal dependence, a freer hand, a larger scope of individual enter- 
prise. 

With the dawn of the Tudor period began the general movement 
which gradually transformed England into a mercantile country. On 

1 A recent writer (Gras, Evolution of the English Corn Market) has taken a 
somewhat different view of the economic position of the manor. He is interested 
in tracing even the most remote beginnings of market relations, and finds that 
such contacts were established at an earlier period in the history of the manor 
than has been generally supposed. But even if we concede that the isolation of 
the manor has been overemphasized in some degree by Prothero and Ashley, it 
still remains true that its activities were but slightly commercialized as 
measured by modern standards. — Editor. 

2 Adapted from English Farming, Past and Present, pp. 32-35, 55-57. (Copy- 
right by Longmans, Green, & Co., London. Used by permission of the publisher.) 



THE PROBLEM OF AGRICULTURAL ECONOMICS 53 

the agricultural side, the spirit of trading competition gave fresh 
impulse to an old movement, which, in spite of a storm of protest, 
continued in activity through the Tudor period, and, after a century 
and a half of silent progress, became once more the center of literary 
controversy before it triumphed at the close of the reign of George III. 
That movement is described as enclosure. The word includes 
various processes, but that special form of enclosure was prominent 
which meant the break-up of the mediaeval agrarian partnerships and 
the substitution of private enterprise for the collective efforts of 
village associations. Agriculturally the period is one of transition 
toward the modern spirit and form of land cultivation. 

12. ENCLOSURE AND BETTER FARMING 1 
By ARNOLD TOYNBEE 

There is no respect in which the agricultural England of today 
differs more from that of the period which we are considering than in 
the greatly reduced amount of common land. The enclosure of com- 
mons had been going on for centuries before 1760, but with nothing 
like the rapidity with which it has been going on since. It is known 
that 334,974 acres were enclosed between 17 10 and 1760, while nearly 
7,000,000 were enclosed between 1760 and 1843. At the beginning 
of the latter period a large proportion of this land, since enclosed, was 
under the primitive tillage of the common fields. Throughout con- 
siderable districts the agrarian system of the Middle Ages still existed 
in full force. Some parishes had no common or waste lands belonging 
to them, but where common lands were cultivated one and the same 
plan was generally pursued. The arable land of each village was 
divided into three great strips subdivided by " baulks" three yards 
wide. Every farmer would own at least one piece of land in. each 
field, and all were bound to follow the customary tillage. One strip 
was left fallow every year; on the other two were grown wheat and 
barley; sometimes oats, pease, or tares were substituted for the latter. 
The meadows were also held in common. Up to hay-harvest, indeed, 
every man had his own plot, but, while in the arable land the plots 
rarely changed hands, in the meadows the different shares were 
apportioned by lot every year. After hay-harvest the fences in the 
meadow land were thrown down, and all householders had common 
rights of grazing on it. Similarly the stubbles were grazed, but here 

1 Adapted from The Industrial Revolution, pp. 3S-46. 



54 AGRICULTURAL ECONOMICS 

the right was rarely open to all. Every farmer had the right of 
pasture on the waste. 

Though these common fields contained the best soil in the king- 
dom, they exhibited the most wretched cultivation. "Never," says 
Arthur Young, "were more miserable crops seen than all the spring 
ones in the common fields; absolutely beneath contempt." The 
causes of this deficient tillage were three in number: (i) The same 
course of crops was necessary. No proper rotation was feasible, the 
only possible alteration being to vary the proportion of different white- 
straw crops. There were no turnips or artificial grasses, and conse- 
quently no sheep-farming on a large scale. Such sheep as there were, 
were miserably small; the whole carcase weighed only 28 lbs. and the 
fleece ,3^ lbs. each, as against 9 lbs. on sheep in enclosed fields. 
(2) Much time was lost by labourers and cattle "in travelling to many 
dispersed pieces of land from one end of a parish to another." (3) Per- 
petual quarrels arose about rights of pasture in the meadows and 
stubbles and respecting boundaries; in some fields there were no 
"baulks" to divide the plots, and men would plough by night to steal 
a furrow from their neighbours. 

For these reasons the connection between enclosure and improved 
agriculture was very close. The early enclosures, made under the 
Statutes of Merton (1235) and Westminster (1285), were taken by 
the lords of the manor from the waste. But in these cases the lord 
had first to prove that sufficient pasturage had been left for the com- 
moners; and if rights of common existed independent of the posses- 
sion of land, no enclosure was permitted. These early enclosures went 
on steadily, but the enclosures which first attract notice toward the 
end of the fifteenth century were of a different kind. They were often 
made on cultivated land, and, if Nasse is correct, they took the form, 
not only of permanent conversions from arable into pasture, but of 
temporary conversions from arable into pasture, followed by recon- 
version from pasture into arable. The result was a great increase of 
produce. The lord having separated his plots from those of his 
neighbours, and having consolidated them, could pursue any system 
of tillage which seemed good to him. The alternate and convertible 
husbandry mentioned above was introduced; the manure of the 
cattle enriched the arable land, and "the grass crops on the land 
ploughed up and manured were much stronger and of a better quality 
than those on the constant pasture." Under the old system the 



THE PROBLEM OF AGRICULTURAL ECONOMICS 55 

manure was spread on the common pasture, while in the enclosures 
it was used for the benefit of land broken up for tillage. 

But the greatest progress in the first half of the eighteenth cen- 
tury seems to have taken place in Norfolk. Everyone has heard of 
Townshend growing turnips at Raynham, after his quarrel with 
Walpole; and Young, writing in 18 12, after speaking of the period 
1 700-1 760 as one of stagnation, owing to low prices ("it is absolutely 
vain to expect improvements in agriculture unless prices are more dis- 
posed to rise than to remain long without variations that give encour- 
agement to the farmer"), admits that the improvements made in 
Norfolk that time were an exception. In his Eastern Tour (1770) 
he had spoken of the husbandry " that has rendered the name of this 
country so famous in the farming world," and given seven reasons for 
the improvements. These were: (1) enclosing without assistance of 
Parliament; parliamentary enclosure, "through the knavery of com- 
missioners and attorneys," was very expensive; "undoubtedly many 
of the finest loams on the richest marls would at this day have been 
sheep-walks, had there been any right of commonage on them"; 

(2) marling, for there was plenty of marl under the sand everywhere; 

(3) an excellent rotation of crops — the famous Norfolk four years' 
course of turnips, barley, clover (or clover and rye-grass), and wheat; 

(4) the culture of turnips well hand-hoed; (5) the culture of clover 
and rye-grass; (6) the granting of long leases; (7) the division of the 
county chiefly into large farms. " Great farms," he says, " have been 
the soul of the Norfolk culture," though in the eastern part of the 
county there were little occupiers of £100 a year. 

If we turn from the cultivation of the soil to the management and 
breeding of live stock, we shall find that no great progress had been 
made in this branch during the years 1 700-1 760. Davenant in 1700 
estimated the net carcase of black cattle at 370 lbs., and of a sheep 
at 28 lbs. A century later Eden calculated that "bullocks now killed 
in London weigh at an average 800 lbs., sheep 80 lbs., and lambs 
about 50 lbs. each"; and Young in 1786 put the weight of bullocks 
and sheep at 840 lbs. and 100 lbs. respectively. But this improvement 
seems to have come about after 1760. It was not until 1760-17S6 
that Bakewell perfected the new breed of sheep — the Leicesters — 
and improved the breed of long-horned cattle, and that the brothers 
Culley obtained the short-horn, or Durham cattle, from the breed in 
the valley of the Tees. Some improvement in the breed of sheep had. 



56 AGRICULTURAL ECONOMICS 

however, already been made. "The wool of Warwickshire, North- 
amptonshire, Lincolnshire, and Rutland, with some parts of Hunting- 
don, Bedford, Buckinghamshire, Cambridgeshire, and Norfolk, has 
been accounted the longest and finest combing wool. But of late 
years [this was written in 1739] there have been improvements made 
in the breed of sheep by changing of rams and sowing of turnips and 
grass seeds, and now there is some large fine combing wool to be found 
in most counties in England, which is fine, long, and soft, fit to make 
all sorts of fine stuff and hose of." Still improvements in feeding 
sheep were by no means universally adopted for half a century later. 
Agricultural implements, too, were very primitive, wooden ploughs 
being commonly in use, while the small, narrow-wheeled waggon of 
the North held 40 or 50 bushels with difficulty. 

An agrarian revolution plays as large part in the great industrial 
change of the end of the eighteenth century as does the revolution in 
manufacturing industries, to which attention is more usually directed. 
.... Severely as these changes bore upon the rural population, they 
wrought, without doubt, direct improvement from an agricultural 
point of view. They meant the substitution of scientific for unscien- 
tific culture. "It has been found," says Laurence, "by long experi- 
ence, that common or open fields are great hindrances to the public 
good, and to the honest improvement which everyone might make of 
his own." Enclosures brought an extension of arable cultivation and 
the tillage of inferior soils; and in small farms of 40 to 100 acres, 
where the land was exhausted by repeated corn crops, the farm build- 
ings of clay and mud walls and three-fourths of the estate often satu- 
rated with water, consolidation into farms of 100 to 500 acres meant 
rotation of crops, leases of nineteen years, and good farm buildings. 
The period was one of great agricultural advance; the breed of cattle 
was improved, rotation of crops was generally introduced, the steam- 
plough was invented, agricultural societies were instituted. 

F. America Recapitulating the History of Agriculture 

13. COLONIAL FARMING 1 
By BENJAMIN PERLEY POORE 

The North American aborigines were not an agricultural people; 
the cultivation of the soil was considered among them as a degrading 
occupation for the men of the tribes, who left it to the old women and 

1 Adapted from "History of the Agriculture of the United States," Report of 
the Commissioner of Agriculture for the Year 1866, pp. 498-509. 



THE PROBLEM OF AGRICULTURAL ECONOMICS 57 

children. Captain John Smith, who visited Virginia in 1609, says: 
"The greatest labor they take is in planting their corn, for the country 
is naturally overgrown with wood. To prepare the ground they 
bruise the bark of trees near the roots, then do they scorch the roots 
with fire that they grow no more." This custom of theirs, it probably 
was, that suggested to our ancestors the process of belting or girdling, 
which killed the larger trees by cutting through the sap-wood, caused 
the fall of spray and lesser branches, and thereby admitted the sun 
and air to the crop cultivated in their intervals — a practice which, as 
compared with the method of clearing off the entire growth, enables 
the settler of new lands to increase the area of virgin soil under culture 
in more than geometrical ratio; which has kept pace with our ever 
advancing frontier, and which, more than any other, has enabled the 
white race "to enter in and possess the good land that lay before 
them." 

The land being cleared — and a field once thus prepared was used 
for many successive years — the squaws would make preparations for 
planting early each spring. First burning the dead wood on the 
ground, and often bringing dry branches to burn, that they might 
obtain their fertilizing ashes, they would then cultivate, or rather root 
up the surface, with the flat shoulder-blades of the moose or with 
crooked pieces of wood. They would then mark the future hills by 
making small holes (about four feet apart) with rude wooden hoes or 
clam shells; put into each one an alewife from some adjoining stream, 
or a horseshoe crab from the seashore; and on this stimulant drop 
and cover a half dozen grains of corn. The land thus planted was 
guarded against the depredations of the birds, and as the corn grew 
the earth was laboriously scraped up around the stalks with clam 
shells, until the hills were two feet high. To use the words of Smith, 
"they hill it like a hop field." While the stalk and leaves were yet 
green, the ears were plucked. The next year's seed was selected from 
those stalks which produced the most ears, and was triced up in their 
wigwams. The remainder of the crop was carried in back-baskets to 
stagings, where it was dried in the husk over smouldering fires, then 
husked, shelled, packed in large birchbark boxes, and buried in the 
ground, below the action of the frost. "With their corn," says 
Smith, " they plant also peas they call assentamus, which are the same 
they call in Italy fagiolia. Their beans they much esteem for dain- 
ties." "In May, also, among their corn they plant pumpeons, and 
a fruit like unto a musk-melon, but less and worse." These addi- 
tional crops not only keep the ground around die roots of the growing 



58 AGRICULTURAL ECONOMICS 

corn moist, but they supply materials for the celebrated Indian dish 
called "mu-si-quatush," which has been changed into sucatush. At 
the northwest wild rice was gathered and kept for winter use; and 
Barlowe, who visited North Carolina in 1584, asserted that he saw 
there "both wheat and oats." It is not improbable that oats were 
found growing wild there, as they are known to grow wild on other 
portions of the continent; but doubts may be entertained as to the 
wheat. Possibly he saw some variety of the triticum, and, without 
critical examination, pronounced it wheat. The sunflower was also 
cultivated for its seeds, of which bread was made. 

''Mish-i-min," in the Algonquin tongue, signifies apple, although 
it is the opinion of some learned writers that this fruit was unknown 
among them before the arrival of the Europeans. Several old printed 
compilations of early voyages, however, reckon apples among the 
early native fruits; and Mr. Walcott, a distinguished Connecticut 
magistrate, wrote in 1635 (certainly not more than five years after his 
colony was first planted), "I made five hundred hogsheads of cider 
out of my own orchard in one year." This would have been almost 
impossible had he been obliged to raise his orchard from the seed, or 
had he planted trees of such a size as could have been transported 
through the trackless wilderness. Certainly the Indians had orchards 
of cherries and of plums, large stores of which were dried for winter 
use. Tobacco was everywhere cultivated, huge grapevines entwined 
many a forest tree, and there was an abundance of berries in the woods. 
Gourds were raised in great numbers. From the sap of the maple was 
made a coarse-grained sugar. 

Such was the primitive agricultural life of the Indians. On many 
a sunny slope now smiling with cultivation were their cheerless wig- 
wams, their crabbed orchards, their ill- tilled corn patches. 

The English Puritans who settled in New England "left their 
pleasant and beautiful homes in England to plant their poor cottages 
in the wilderness," that they might worship God as revelation and 
conscience might teach, and found a free agricultural state equal to 
Palestine in its palmiest days, when Israel's kings had "herds of 
cattle, both in the low country and on the plains, granaries for their 
abundant crops, husbandmen also, and vine-dressers in the moun- 
tains." 

In England, agriculture has long been regarded as the most favor- 
able occupation for the development of Christianity, and had, prior 
to the Reformation, received the special attention of the clergy. 



THE PROBLEM OF AGRICULTURAL ECONOMICS 59 

Dorsetshire and Wiltshire, the English homes of the Puritans ere they 
made their exodus to a transatlantic Canaan, are even now remark- 
able for their almost total absence of the usual signs of trade and 
manufactures ; and we are informed by Bancroft that those who first 
went fo Holland were anxious to emigrate again because they "had 
been bred to agricultural pursuits," yet were there "compelled to 
learn mechanical trades." 

This desire on the part of the Puritans that "New England" 
should be an agricultural community was strikingly manifested by the 
corporation of Massachusetts Bay, whose charter extended from a 
line three miles south of Charles River to another three miles north 
of "any and every part" of the Merrimac. Each contributor and 
each stockholder received two hundred acres of land for every fifty 
pounds sterling paid in, while stockholders and others who emigrated 
at their own expense received fifty acres for each member of their 
family and each "indented servant." This shows that it was a rural 
home in this land of freedom, and not town lots or semiannual divi- 
dends that these liberal adventurers sought, and we find further con- 
firmation of their agricultural proclivities in the inventories of the 
supplies sent by the corporation to the new colony. "Vyne planters " 
are mentioned usually after "ministers"; then come hogsheads of 
wheat, rye, barley, and oats, un threshed; beans, peas, and potatoes; 
stones of all kinds of fruit; apple, pear, and quince kernels; hop, 
licorice, and madder roots; flax and woad seed; currant plants, and 
tame turkeys. Cattle were imported by the colonists, not only from 
various parts of England, but from Holland, Denmark, and the Span- 
ish Main, forming a noble foundation for that "native stock" which, 
when carefully reared and well fed, is at least equal to many of the 
vaunted imported breeds. Horses, sheep, swine, and goats were also 
imported from Europe in large numbers. Neither was horticulture 
neglected, for we find that Governor Endicott had a vegetable garden 
and vineyard in 1629, and two years afterward he planted the famous 
pear orchard of which one venerable survivor still bears the patriarchal 
honors. 

The immigrants found that Boston had "sweet and pleasant 
springs and good land affording rich corn grounds and fruitful gar- 
dens "; but as their numbers and the numbers of their cattle increased. 
they formed colonies in various directions, especially in "Wanne- 
squam-sauke" (now Essex County), for amid its "pleasant waters" 
were unwooded meadows suitable for pasturage and for grass cutting, 



60 AGRICULTURAL ECONOMICS 

while the uplands were well adapted for tillage. Squatter sovereignty 
was unknown, for no individuals were permitted to establish them- 
selves within the limits of the colony. Each body swarmed out in 
community, with a regular allotment of individual farms, based in 
extent upon the wealth of the settlers, and a great pasture, a peat 
meadow, a salt marsh, and fishing grounds held in common. These 
farms were so laid out that no house was over hah a mile from the 
meeting-house, and it was with astonishing rapidity that agricultural 
communities sprang up like the fabled warriors of Cadmus into full- 
armed life. 

The immigrants were supplied with carts, chains, shovels, hoes, 
and rakes, but it was some years before a plough was introduced; 
and even so late as 1637 there were but thirty ploughs in Massachu- 
setts, A yeoman in Salem that year made complaint that "he had 
not sufficient ground to maintain a plough" on his tract of three 
hundred acres, and he was allowed an addition of twenty acres to his 
original grant if he would "set up ploughing." The ploughs first used 
were the imported English wheel ploughs, but somewhat fighter, 
although clumsy kinds were in time made by the village wheelwright 
and blacksmith. Then came what was long known as the Cary 
plough, with clumsy wrought-iron share, wooden landside and stand- 
ard, and wooden mouldboard plated over with sheet-iron or tin, and 
with short, upright handles, requiring a strong man to guide it. The 
bar-share plough was another form still remembered by many for its 
rudely fitted wooden mouldboard and coulter, and immense friction 
from the rough iron bar which formed the landside. 

Massachusetts was the first among the colonies to introduce the 
manufacture of scythes and other agricultural implements. In 1646 
the general court granted to Joseph Jenckes, of Lynn, a native of 
Hammersmith, in England, and connected with the first ironworks in 
that colony, the exclusive privilege for fourteen years "to make 
experience of his abillityes and inventions for making, among other 
things, of mills for the making of sithes and other edge tooles." His 
patent "for ye more speedy cutting of grass" was renewed for seven 
years in May, 1655. The improvement consisted in making the blade 
longer and thinner, and in strengthening it at the same time by welding 
a square bar of iron to the back, as in the modern scythe, thus materi- 
ally improving upon the old English scythe then in use, which was 
short, thick, and heavy, like a bush scythe. A century later a Scotch- 
man named Hugh Orr came to Massachusetts and erected at Bridge- 



THE PROBLEM OF AGRICULTURAL ECONOMICS 61 

water the first trip hammer in the colony, with which he manufactured 
scythes, shovels, axes, hoes, and other implements, for which that 
place has since enjoyed a deserved reputation. 

The tidewater regions of Maryland and Virginia and the Caro- 
linas were originally settled by the cavalier aristocracy of England, 
with their servants and their slaves. Next came the Scotch merchants 
and mechanics, and French Huguenots of high character and attain- 
ments. In later years, the unsuccessful rebellions of the elder and 
younger Pretenders forced large numbers of Scotch Jacobins to seek 
new homes on the western continent. Many indentured white serv- 
ants, and some transported convicts, were also sent over from Eng- 
land. 

The feudal system was transplanted to Virginia, and the royal 
grants of land gave the proprietors baronial power. The Maryland 
and Virginia estates were large, extending far back in the country 
from their fronts on the Chesapeake Bay or its tributaries, near which 
the buildings were located. Tidewater was at every cavalier planter's 
door, and ships from England brought him his annual supplies of mer- 
chandise in exchange for his crop of tobacco, while smaller crafts came 
with the products of the New England fisheries and of the West India 
plantations to barter for his tobacco, cotton, wheat, or corn. The 
neighboring waters swarmed with many varieties of wild fowl, and 
abounded with fish, oysters, soft crabs, and turtle, while in the woods 
was an abundance of game. 

Tobacco became the staple product of Virginia soon after the first 
settlement of the British colonists, and although many and stringent 
laws were enacted to prevent its cultivation, little attention was paid 
to any other crops beyond what was needed for home consumption. 
Attempts were made to encourage other branches of rural industry. 
But the Virginia landowners preferred the exhausting tobacco plants, 
with a continuous cropping, shallow ploughing, and no supplies of 
fertilizers, until every particle of nourishment had been drawn from 
the soil by the plants, or washed out by the rains. The implements 
used were small ploughs and heavy hoes; and when the tobacco had 
been gathered, cured, and packed into hogsheads, these were rolled 
to the nearest inspection wharf. The roads were bad, and there were 
but few wagons, so a pole and whifEetrees were attached to each hogs- 
head by an iron bolt driven in the centre of each head, and it was 
converted into a large roller. For many years the places for deposit 
and inspection of tobacco on the river were called "rolling houses." 



62 AGRICULTURAL ECONOMICS 

King James the First, prompted doubtless by his antipathy to 
"the Virginia weed," and "having understood that the soil naturally 
yieldeth store of excellent mulberries," gave instructions to the Earl 
of Southampton to urge the cultivation of silk in the colony in prefer- 
ence to tobacco, "which brings with it many disorders and incon- 
veniences." "As early as the year 1623, the colonial assembly 
directed the planting of mulberry trees; and in 1656 a penalty of ten 
pounds of tobacco is imposed upon every planter who shall fail to 
plant at least ten mulberry trees for every hundred acres of land in 
his possession. In the same year a premium of 4,000 pounds of 
tobacco was given to a person as an inducement to remain in the 
country and prosecute the trade in silk; and in the next year a pre- 
mium of 10,000 pounds of tobacco was offered to any one who should 
export 200 pounds worth of the raw material of silk." About the 
same time 5,000 pounds of the same article was promised "to any 
one who should produce 1,000 pounds of wound silk in one year." In 
1666 it was determined that all statutory provisions were thereafter 
unnecessary, as the success of divers persons in the growth of silk, and 
other manufactures, "evidently demonstrated how beneficial the 
same would prove." 

Cotton, which is the staple of the southern states settled by Vir- 
ginians, was first grown by the early colonists in 1621, but it was not 
an article of general home consumption or of export for many years. 
In 1748 seven bags of cotton-wool, valued at £3 us. 5 d. a. bag, were 
among the exports of Charleston, South Carolina; and after the 
Revolution the growth and exportation of the sea island cotton was 
commenced, seed having been obtained from one of the leeward isles. 
Originally the cotton was separated from the seed with the fingers, 
and afterward there were several contrivances used, among them the 
employment of a long bow fitted with a number of strings, which 
being vibrated by the blows of a wooden mallet while in contact with 
a bunch of cotton, shook the seed and dust from the mass. In 1742, 
M. Dubreuil, a wealthy planter of New Orleans, invented a cleaning- 
machine, which was so far successful as to give quite an impulse to the 
cotton culture in Louisiana, and several other inventions' were 
subsequently used in other sections of the South, but none of them 
accomplished the desired work. In 1794, Eli Whitney, a native of 
Massachusetts, then residing in Georgia, discovered the saw-gin, 
which completely removes all extraneous matters without injury 
to the fibre, and enables a man to clean three hundred pounds a day 



THE PROBLEM OF AGRICULTURAL ECONOMICS 63 

instead of one pound, as he had been able to do by hand. This 
wonderful labor-saving machine has exerted an influence on the indus- 
trial interests of the world, and has placed cotton foremost among 
our national exports. 

The production of wine in the Atlantic colonies was believed to be 
practicable by many of the early settlers, and several of the governors 
endeavored to encourage the planting of vineyards. In 1758, the 
London Society for the Encouragement of Arts, Commerce, and 
Manufactures proposed the following premium for the wine itself: 
"As producing wines in our American colonies will be of great advan- 
tage to those colonies, and also to this kingdom, it is proposed to give 
to that planter, in any of our said colonies, who shall first produce, 
within seven years from the date hereof, from his own plantation, 
five tons of white or red wine, made of grapes, the produce of these 
colonies only, and such as, in the opinion of competent judges, ap- 
pointed by the society in London, shall be deemed deserving the 
reward — not less than one ton thereof to be imported to London — 
one hundred pounds." 

14. THE SELF-SUFFICING AGRICULTURE OF A 
GENERATION AGO 1 

By RODNEY WELCH 

During my childhood, which was passed on a rocky hillside farm 
in New England, farmers constituted a class more nearly independent 
than any other in the community. They were engaged in domestic 
husbandry, which embraced the care of cultivated fields, pastures, 
gardens, orchards, and forests. They produced nearly all the food 
that was necessary for their families. The owner of a small farm not 
infrequently raised corn, wheat, rye, barley, and buckwheat, as well 
as potatoes and all kinds of garden vegetables. The sweets for the 
table were often limited to the sugar and molasses that he made from 
the sap of the maple and to the honey collected by his bees. Small 
game was obtained from the forest, and trout were caught in the 
streams that flowed among the hills. The lakes afforded larger fish, 
like perch and pickerel. Every farmer's intention was to raise each 
needful article of food that the climate and soil enabled him to pro- 
duce. Even condiments, like pepper, caraway seed, sage, and other 

1 Adapted from "The Farmer's Changed Condition," Forum, X (February, 
1891), 689-92. 



64 AGRICULTURAL ECONOMICS 

sweet herbs, were not below his attention. As a considerable portion 
of every farm was covered with forest trees of various kinds, the 
owner was at no expense for fuel or for materials to be used in making 
fences or in erecting ordinary buildings. 

In those times most of the trade of farmers was carried on by 
barter. Eggs, butter, cheese, and smoked hams were taken by coun- 
try storekeepers in exchange for groceries, dry goods, and notions. 
Nearly every farmer went to the seashore once a year, and exchanged 
apples, cider, potatoes, and garden vegetables for fish. The prod- 
ucts of farm, garden, and orchard often paid the salary of the minis- 
ter, the fees of the doctor, and the subscription price of the newspaper. 
A thrifty farmer generally managed to have the skins of the animals 
that he slaughtered at home tanned and dressed on shares, as by so 
doing he obtained leather for making shoes and boots for his family 
without the payment of money. Shoemakers, tailoresses, wheel- 
rights, and pump-makers plied their arts on farms at the call of the 
owners. 

Every farmhouse was then a manufactory, not of one kind of 
goods, but of many. All day long in the chamber or attic the sound 
of the spinning-wheel and loom could be heard. Carpets, shawls, bed- 
spreads, table-covers, towels, and cloth for garments were made from 
materials produced on the farm. The kitchen of the house was a 
baker's shop, a confectioner's establishment, and a chemist's labora- 
tory. Every kind of food for immediate use was prepared there daily ; 
and on special occasions sausages, head cheese, pickles, apple butter, 
and preserves were made. It was also the place where soap, candles, 
and vinegar were manufactured. Agricultural implements were then 
few and simple, and farmers made as many of them as they could. 
There were no commercial dairy establishments, but every farmhouse 
was a creamery and a cheese factory. As there were no sewing 
machines, the farmer's wife and daughters had to ply the hand needle 
most of the time when they were not engaged in more laborious pur- 
suits. During the long evenings they generally knit socks and 
mittens or made rag carpets. 

As has been stated, little money circulated among farmers. In 
fact, but little was required, except to purchase schoolbooks and 
other articles that could not be obtained by barter, and to pay the 
taxes and postage. Some of the taxes, even, were not paid in money. 
The highway tax was generally paid in labor, or rather in play. In 
many cases farmers had their postage charged up to them till they 



THE PROBLEM OF AGRICULTURAL ECONOMICS 65 

could raise money to pay it. Most of the pastoral scenes described 
by the writers of the Old Testament, and by Virgil and Agricola, were 
presented anew every year in New England during the period under 
consideration. The inventor had not dreamed of machines for plant- 
ing, cultivating, and harvesting field crops. 

There was little of what could be called commercial farming in the 
northern states at that time. Farmers who were located near the sea- 
coast, or near a navigable river, could always dispose of their surplus 
products to good advantage and at fair prices. But such was not 
the case with farmers who lived a long distance from water communi- 
cations. They could drive their cattle to market, but the price of 
their grain was consumed in hauling it a hundred miles, while their 
apples and potatoes would not be accepted as gifts. There was often 
great scarcity of some product of which there was an abundance in a 
locality two hundred miles away. Wool was almost the only article 
that could be transported a long distance without having its price 
absorbed in the cost of cartage. There were no railroads. The earth 
roads were poor, and oxen were generally employed to draw farm 
products to market. 

Note. — Lack of markets or means to reach them were conditions 
found in all sections of the country during the period of settlement. 
In Ohio- 
There was little inducement to cultivate the soil in those days, except 
to produce what the family consumed and what would support the stock 
and pay the taxes — the latter, the farmer very frequently not being able 
to realize enough of money from his crops to do. There was no market at 
home, no foreign demand, and if there had been, it would have been beyond 
their reach. The opening of the Ohio canal in 1827 was the first godsend 
to the early settlers of the county, and after that the completion of the 
P., Ft. W. & C. R. R. imparted value to every product of the farm 
[Ben Douglass, History of Wayne County, Ohio, pp. 191-95]. 

In Missouri in 1826 — 

The difficulty of finding a market for the surplus produce is not a 
diminutive evil. There is not that ease and certainty of raising a small 
sum of money by sending the articles of the farm to a sure market. All 
articles of life in Illinois and Missouri have been, for some years, below 
what the planters could afford to raise them for, with any view beyond 
domestic consumption. There is a great abundance and variety of wild 
fowl and turkeys. A Missouri planter, with a moderate force and a good 
plantation, can be as independent as it is fit that we should be. He can 



66 AGRICULTURAL ECONOMICS 

raise the materials for manufacturing his own clothing. He has the greatest 
abundance of everything within himself except those articles not naturally 
congenial to the climate [Timothy Flint, Recollections of the Last Ten 
Years, pp. 247-49]. 

In Iowa, from 1840 to 1850, very little money was paid out for wages. 
The amount of money in circulation was small, pioneers were poor and 
inclined to do their own work, and as farmers exchanged the products of 
their farms in barter, laborers when hired were largely paid in produce 
[Bulletin gg, Bureau of Statistics, U.S. Department of Agriculture]. — Editor. 

15. PASTORAL LIFE ON THE AGRICULTURAL FRONTIER 1 
By RAY STANNARD BAKER 

The cattleman followed the hunter, spreading rapidly from Texas, 
Kansas, and Nebraska, westward and northward over all the range 
states — New Mexico, Arizona, California, Nevada, Utah, Colorado, 
Wyoming, and the western part of the Dakotas, Montana, Idaho, 
Oregon, and Washington — to each state according to its grassland. 
In those days of the first invasion it was all a golden land. "Here," 
said the cattleman, "is food for all the cows in the world." So he 
began raising vast herds, and they multiplied and spread like locusts, 
for the grass and the water were both free, and horses were to be had 
for the catching. He thrived abundantly — at first. No restrictions 
hemmed him in save those conveniently set by his own conscience or 
inspired by respect for his neighbor's six-shooter. It was a glorious 
primitive society. 

To be a cowman meant being a small but powerful king, with a 
princely kingdom. There was no rent and virtually no taxes to pay. 
A man might own a hundred thousand cattle and not an acre of land, 
though he claimed "range rights" to fifty thousand acres, and 
enforced those rights with blood and iron. Apparently this was a 
new sort of free life in which man had risen above the old slow rules of 
thrift. It was a simple business : turn the cattle to grass, and when 
money was needed, round them up and sell them. 

Presently, however, the first real settlers, the "nesters" of Texas, 
who wished to fence the land for farms, appeared in numbers, and the 
early comers, the original cowboys, began to chafe. " Who's elbowing 
me ? " they enquired, and there was prompt and effective shooting and 
the wholesale cutting of the new fences. Likewise, there came the 

1 Adapted from "The Tragedy of the Range," Century, LXIV, 536-41. 
(Copyright by the Century Co.) 



THE PROBLEM OF AGRICULTURAL ECONOMICS 67 

competition of the sheepman. Vast flocks appeared on the range, 
burning across it like so much live fire, the sheep eating out the vege- 
tation to its very roots. It became a common experience for a cattle- 
man to be "sheeped," as he called it, and it was not surprising that 
he looked coldly on the sheepmen and their flocks. On the other 
hand, the sheepmen asserted, truly enough, that the land belonged 
to the government, not to the cattleman ; that it was free range ; that 
the sheep had as much right there as the cows. Result, six-shooters, 
as usual. In some cases the cowboys fortified the water-holes, pre- 
venting the sheep from drinking, and hundreds died terribly of thirst. 
In other cases, more bold, they rushed in, shot down the shepherds, 
and " rustled" the sheep to their death over some precipice, or 
killed them by shooting. It was no man's land; therefore might 
was right. But sometimes the range was eaten so bare that the 
cattlemen lost interest and sold out to the sheepman, and let him 
have his way. 

But today the new Westerner has come. Jack, the cowboy, has 
had his fling: the time is near when he will shoot up a town or rope 
a constable for the last time. And the man who follows him is quite 
a different person — not so picturesque by a long way, not so carelessly 
free, a person whom Jack despises with all his big, warm, foolish heart, 
and dreads with all his unpractical head. For Mr. Brown is from 
Kansas — or is it Wisconsin ? — a practical, unpoetic man, who wears 
suspenders and a derby hat, whose rear pocket bulges with no six- 
shooter. He is wholly without respect for range boundaries set by 
honorable custom; he looks up his rights in a calfskin lawbook and 
sets down his expenditures in a small red book, so that he can tell at 
the end of the year how much he has made or lost. One of his chief 
weapons is the barbed-wire fence, which he strings ruthlessly along 
the rivers or around his leased school land, where cattle once roamed 
free. Kill him and be done with it, but the next day comes Mr. Smith 
from Ohio, and with him Mr. John Doe, of Boston, doing the same 
despicable things, as Jack sees them. Is there no end of them ? 
And killing, unfortunately, grows unpopular; even dangerous. 

Yes, Smith has come, scattering homes with women in them; 
tomorrow he will build a cheap little church, spireless but hopeful; he 
will have his schoolhouse and his justice-court. Do not imagine for 
a moment that Smith is a philanthropist, or that, feeling shame for 
the ruin of a splendid empire, he is setting himself with deliberate 
patriotism to save it. By no means. Smith is as healthily selfish as 



68 AGRICULTURAL ECONOMICS 

Jack himself, but his interests cry for law and order ; for the private 
and peaceful possession of land instead of a bloody and wasteful free 
range; for homes instead of tents. 

Note. — This pastoral period in the development of the West was 
but typical of what happened in all sections of the country. The 
ranchers were the advance guard of the army of agriculture, and 
grazing was the transition stage between hunting and trapping, and 
settled agriculture. Professor Turner tells us 1 that there was such 
a "rancher's frontier" in Virginia at the close of the seventeenth 
century. "Travelers of the eighteenth century found the 'cow pens ' 
among the canebrakes and pea-vine pastures of the South and the 
'cow drivers' took their droves to Charleston, Philadelphia, New 
York. Travelers at the close of the War of 1 812 met droves of more 
than a thousand cattle and swine from the interior of Ohio going to 
Pennsylvania to fatten for the Philadelphia market." Thence the 
rancher was crowded on to new frontiers beyond the Mississippi, out 
upon the semi-arid plains and up into the mountains. Today he 
retains but little land which is suitable to more intensive uses. — 
Editor. 

G. The Transition to Commercialized Agriculture 

16. THE OLD FARMER AND THE NEW 2 
By KENYON L. BUTTERFIELD 

The old farmer was a pioneer, and he had all the courage, enter- 
prise, and resourcefulness of the pioneer. He owned and controlled 
everything in sight. Half a century ago, in the Middle West, the 
strong men and the influential families were largely farmers. 

The new farmer lives in a day when the nation is not purely an 
agricultural nation, but is also a manufacturing and a trading nation. 
But he realizes that out of this seeming decline of agriculture grow his 
best opportunities. He discards pioneer methods because pioneering 
is not now an effective art. 

Economically, the old farmer was not a business man, but a bar- 
terer. The rule of barter still survives in the country grocery where 
butter and eggs are traded for sugar and salt. The old farmer was 
industrially self-sufficient. He did not farm on a commercial basis. 

1 The Significance of the Frontier in American History. 

2 Adapted from Chapters in Rural Progress, pp. 54-61. (The University of 
Chicago Press.) 



THE PROBLEM OF AGRICULTURAL ECONOMICS 69 

He raised apples for eating and for cider, not for market — there was 
no apple market. He had very little ready money; he bought and 
sold few products. Even his grain, which afterward became the 
farmer's great cash crop, was raised in small quantities and ground 
at the nearest mill — not for export, but for a return migration to the 
family flour-barrel. 

The new farmer has kept pace with our industrial evolution. 
When the regime of barter passed away, he ceased to barter. When 
the world's market became a fact, he raised wheat for the world's 
market. As agriculture became a business, he became a business 
man. As agricultural science began to contribute to the art of 
farming, he studied applied science. As alertness and enterprise 
began to be indispensable in commercial activity, he grew alert and 
enterprising. 

But it is not sufficient to picture the new farmer. You must 
explain him. What is it that makes the new farmer ? Who is he ? 
What are his tools ? Of course, you must observe the individual 
traits that characterize the new farmer, such as keenness, business 
instinct, readiness to adopt new methods, and, in fact, all the qualities 
that make a man a success today in any calling. For the new farmer, 
in respect to his personal qualities, is not a sport, a phenomenon. He 
does not stand out as a distinct and peculiar specimen. He is a 
successful American citizen who grows corn instead of making steel 
rails. 

But you have not yet explained the new farmer. These personal 
traits do not explain him. It may be possible to explain an individual 
and his success by calling attention to his characterisitics, and yet you 
cannot completely analyze him and his career unless you understand 
the conditions under which he works — the industrial and social envi- 
ronment. Much less can you explain a class of people by describing 
their personal characteristics. You must reach out into the great 
current of life that is about them and discern the direction and power 
of that current. 

Now, the conditions that tend to make the new farmer possible 
may be grouped in an old-fashioned way under two heads. In the 
old scientific phrases the two forces that make the new farmer are the 
" struggle for life" and "environment," or, to use other words, com- 
petition and opportunity. 

Competition has pressed severely upon the farmer — competition 
at home and competition from other countries. At one time the 



70 AGRICULTURAL ECONOMICS 

heart of the wheat-growing industry of this country was near Roches- 
ter, New York, in the Genesee Valley; but the canal and the railway 
soon made possible the occupation of the great granary of the West. 
A multitude of ambitious young men soon took possession of that 
granary, and the flour-mills were moved from Rochester to Minne- 
apolis. This is an old story, but the same forces are still at work. 
The sheep of the Australian bush have become competitors of the 
flocks that feed upon the green Vermont mountains and the Ohio 
hills. The plains of Argentina grow wheat for London. Russia, 
Siberia, and India pour a constant stream of golden grain into the 
industrial centers of Western Europe, and the price of American wheat 
is fixed in London. These forces have produced still another kind of 
competition, namely, specialization among farmers. Localities par- 
ticularly adapted to special crops are becoming centers where skill and 
intelligence bring the industry to its height. The truck-farming of 
the South Atlantic region, the fruit growing of western Michigan, the 
butter factories of Wisconsin and Minnesota, have crowded almost to 
suffocation the small market-gardener of the northern town, the man 
with a dozen peach trees, and the farmer who keeps two cows and 
trades the surplus butter for calico. These things have absolutely 
forced progress upon the farmer. It is indeed a "struggle for life." 
Out of it comes the "survival of the fittest," and the fittest is the new 
farmer. 

But along with competition has come opportunity. Indeed, out 
of these very facts that have made competition so strenuous spring 
the most marvelous opportunities for the progressive farmer. Spe- 
cialization brings out the best that there is in the locality and the 
man. It gives a chance to apply science to farming. Our transpor- 
tation system permits the peach-growers of Grand Rapids to place 
their crops at a profit in the markets of Buffalo and Pittsburgh; the 
rich orchards and vineyards of California find their chief outlet in the 
cities of the manufacturing Northeast — three thousand miles away. 
During the forty years, from i860, the exports of wheat from this 
country increased from four million bushels annually to one hundred 
and forty million bushels; of corn, from three and one- third million 
bushels to one hundred and seventy-five million bushels; of beef 
products, from twenty million pounds to three hundred and seventy 
million pounds; of pork products, from ninety-eight million pounds 
to seventeen hundred million pounds. And not only do the grain and 
stock farmers find this outlet for their surplus products, but we are 



THE PROBLEM OF AGRICULTURAL ECONOMICS 71 

beginning to ship abroad high-grade fruit and first-class dairy 
products in considerable quantities. Low rates of freight, modern 
methods of refrigeration, express freight trains, fast freight steamers — 
the whole machinery of the commercial and financial world are at the 
service of the new farmer. 



17. WHERE THE PRINCIPLE OF EXCHANGE-PRODUCTION 
HAS BEEN ABUSED 1 

By MRS. G. H. MATHIS 

There is nothing on the face of the earth, in our climate or in our 
soil, that forces Alabama into a one-crop system. We can grow any- 
thing that will grow in the temperate zone. But still we do a whole 
lot of nonsensical things; we just get right in our own way and keep 
a-standing there. In the first place, we send here to St. Louis, Chicago, 
and Kansas City, and we buy meat, ham, breakfast bacon, and all 
sorts of hog meat, and we pay anywhere from 12 to 30 cents a pound, 
and we can grow all we want at 2 J cents. It is a fact; get our agri- 
cultural bulletins and see that we can. And we send and buy beef 
and we pay all sorts of prices for it, 10, 20, and sometimes 40 cents a 
pound, and we can grow that same beef at 4 cents or less. And then 
we send out West and we buy hay, and we pay anywhere from $15 
to $26 a ton, and $16 of that money is freight and goes to the railroad, 
and $4 of it goes to the middleman who handles it, and the fellow who 
grows the hay gets $6 a ton, and we don't care a cent who gets the 
money, just so we get rid of it. And we grow that hay for $1 . 50 a 
ton. Now talk about us shipping hay into Alabama. Why, we have 
to work ourselves to death to keep from growing hay. We have to 
kill the grass to grow the cotton to buy the grass, and we haven't had 
time to see what else we could do. And when it comes to corn, we 
have got the world's record on corn beat — 23 2 J bushels to the acre. 
Alabama is the natural home of corn. 

Note. — Plenty of other illustrations might be cited of the same 
failure to produce for home consumption in other one-crop sections. 
The wheat farmer of Minnesota or Dakota has become so much 
engrossed in raising his single cash product that he has neglected to 
set out fruit trees or even cultivate a garden, but has bought his food 
in tin cans at the grocery in town. Likewise, the Northwest has sold 

1 Adapted from an address delivered at the Second Annual Convention of the 
Farm Mortgage Bankers' Association, St. Louis, October 7 and 8, 19 15. 



72 AGRICULTURAL ECONOMICS 

alfalfa hay to the Wisconsin dairyman at $1.50 a ton and then 
imported Wisconsin butter at 40 cents or more a pound — bringing 
coals to Newcastle in that natural dairy country. 

But today the farmer of the North and West is adding animals 
enough at least to consume products that would otherwise go prac- 
tically to waste, and "general farming" is largely displacing one- 
crop methods. At the South diversification has been the cry for 
several years. The newer slogan, " Safe Farming,'' brings out well the 
likenesses and differences between agriculture and other lines of pro- 
duction, such as manufacturing. Safe farming means raising "food 
and feed crops" in quantity sufficient to the farmer's home needs. 
Such crops are not unlike the by-products of the factory, since they 
utilize time, much of which could not otherwise be turned to good 
advantage, and likewise use low- value or waste products as roughage, 
or secure a good return from pasture land that would otherwise yield 
no product. The factory sells its by-products; the farmer consumes 
his in the business. But both specialize in a marketable product. 
Safe farming does not mean a return to the inefficiencies of the self- 
sufficing regime, nor the abandonment of cotton or some other cash 
crop. — Editor. 



18. THE POSITION OF THE FARMER IN OUR ECONOMIC 

SOCIETY 1 

By EDWARD F. ADAMS 

The farmer has been prone to rely too much upon a partisan press, 
and the utterances of political and other orators, who seek to accom- 
plish some present end by exciting and increasing his prejudices. As 
a result, the farmer is continually at a disadvantage in his pecuniary 
dealings with those better informed than he as to the trend of com- 
mercial movements. The only remedy for the farmer is a study of 
fundamental principles, in the light of which he may correctly read 
the meaning of current events. 

A study of the business relations of the farmer takes us far from 
the farm. The farmer's interests are intertwined with all other inter- 
ests. The great social and commercial movements of the day are 
matters of dollars and cents to the farmer. Whatever concerns the 
farmer concerns all mankind, and whatever affects other classes 

1 Adapted from The Modern Farmer in His Business Relations, pp. 7, 8, i5 -I 7> 
32-38. (Copyright by Edward F. Adams. Published by N. J. Stone Co.) 



THE PROBLEM OF AGRICULTURAL ECONOMICS 73 

reacts upon him, and this not merely in an esoteric sense, but in the 
dollars and cents which he pays out. What occurs on and about the 
farm the farmer can see, understand, and in some measure control. 
What occurs elsewhere, however profoundly it may affect him, he 
may never even hear of and can hardly influence at all. It is essential 
that the farmer know more than he does of those distant forces, 
because it is necessary that he adjust himself to conditions which he 
cannot control. The farmer, for example, cannot control the opera- 
tions of railroad magnates, the machinations of speculators on grain 
exchanges, the rate of discount at the Bank of England, or the stand- 
ard of life of the Indian ryot, but all these help to determine the price 
he shall receive for his wheat and what he shall pay for the supplies 
he needs. The intent of this book is to set him thinking more about 
such things. 

The new farmer is primarily a business man. He is assumed to 
know how to make crops grow, and usually he does. The main ques- 
tion is whether he knows how to produce crops which will sell for more 
than they have cost. If he cannot in the long run do this, his inevit- 
able destiny is to become the servant of someone who knows how to 
direct his labor to profitable results. Below this lies the problem as 
to whether the majority of men possess the business ability requisite 
to successful farming under modern conditions, and upon the answer 
to this question depends the future of our rural civilization. If it be 
decided in the affirmative, the race of independent small farmers will 
continue; if in the negative, farm labor will come to be exploited by 
able men conducting huge agricultural operations, just as mechanical 
labor is now exploited by captains of industry. 

In this age the simple but independent life of the pioneer farmer 
is no longer possible in America, nor, with our changed habits and 
desires, would it be agreeable. It would involve a distinct lowering 
of our present standard of comfort, which, with all our complaint, is 
far higher than formerly, and would not result m the same content 
and consequent survival which the same conditions formerly induced. 
The impossibility of the life will be seen by any farmer who will trace 
out what would happen should he attempt it. Doubtless the farmer 
could produce more for his own consumption than he does, but, in the 
main, under the changed conditions of modern life, he is compelled to 
sell for money most of his products and buy for money most that he 
consumes. The mechanical facilities of modern times have enor- 
mously reduced the cost of production, and improved transportation 



74 AGRICULTURAL ECONOMICS 

has made every farmer of the civilized world the competitor of every 
other farmer in the sale of products consumed at his own door, and 
he who can produce cheapest will survive. The farmer, therefore, 
must have the best machinery and make it available over the largest 
possible area, and this, again, restricts the small farmer at least to the 
production of the specialty best adapted to his location. There is 
another reason for this: formerly, when his surplus product was con- 
sumed near by, he could know the capacity of his market and the 
competition to be expected; now, when his surplus is often consumed 
many thousands of miles away and sold at the price fixed by the 
competition of the world, it is very difficult for any farmer to inform 
himself of the probable profit of production of many articles. And 
yet this knowledge, while far more difficult than formerly for the 
farmer to obtain, is far more essential, because, while formerly the 
farmer was interested in the money value of but a small portion of 
his product, he is now interested in the money value of nearly all of it. 

Still other elements now have to be considered by the farmer. 
The increased use of money involves borrowing and debt. With 
proper business knov/ledge, borrowing is legitimate and profitable to 
the borrower; nearly all business men are large borrowers; but bor- 
rowing in excess of the knowledge to use wisely involves risk, paid for 
by high interest, and often leads to disaster. The farmer, unaware 
of his ignorance, has become greatly indebted, and is now profoundly 
interested in a stable currency. From being a very small buyer he 
has become a very large one, and is vitally interested in the control 
of trusts and other combinations affecting the price of the necessities 
of life. As all that he sells and all that he buys are necessarily trans- 
ported over the great routes of commerce, he has come to have a 
money interest in the conduct and control of transportation com- 
panies. Paying more taxes than he did, the farmer is more interested 
in the maintenance of a just system of taxation and the economical 
conduct of all public affairs. All these and kindred subjects form 
part of the great science of economics, as to which it is highly necessary 
that the farmer be well informed in order, in the conduct of his busi- 
ness and by his vote when necessary, intelligently to protect his own 
interests. 

It appears, then, that from being a producer and manufacturer 
on a small scale for the home market he has become a producer and 
merchant on a large scale for the markets of the world. While once 
little knowledge would serve him, and that mostly such as his own 



THE PROBLEM OF AGRICULTURAL ECONOMICS 75 

observation could supply, it is now essential that he be a broadly 
educated man, familiar with the conditions affecting his own business 
in all parts of the world. Henceforward the successful farmers will 
be only those so educated; the weaker farmers will be those who 
direct their labors least wisely; these, again, will be those who know 
least. It is therefore a logical necessity that those farmers who 
expect to live as such shall adapt themselves to their changed environ- 
ment by acquiring the information necessary to enable them to sus- 
tain themselves under their changed conditions. 

Farmers are apt to denounce the great salaries paid in some walks 
of life, but they are nearly always the price paid for knowledge at 
market rates. The farmer who prefers the life of a banker has merely 
to know better than anyone else what property is safest to lend money 
on, and to make his ability known; some bank will soon want him. 
Farmers are large borrowers, and as they are apt to seek loans which 
they have not the knowledge to use wisely, the bank president must 
be a better judge of the possible profits of farming than the farmer 
himself, lest the bank's funds be invested where they cannot be got 
back when wanted. This means a high salary for the bank officer, x 
which goes to reduce the profit of the farmer, for ignorance must pay 1 
its own bills. If farmers could know enough about their own business 
to make loans to them certain to be so wisely used as to pay interest 
promptly and the principal at maturity, a less expensive man could 
lend them money, and the farmer's profits be so much increased. 

I simply record my own judgment, which is that the farmer has 
ceased to be the independent man whom I knew in my boyhood. He 
is attacked by the care and worry of the business man, without the 
business man's equipment to meet them, and he is losing ground. 
We are being distanced, not by greater strength, but by a wiser use 
of strength. Other classes know better than we what it will pay to 
do or avoid. This knowledge comes, not by vague speculation, but 
by the mastery of facts. We farmers reason well enough upon what 
we think to be true, but we are so often mistaken in our facts that 
we are as apt to be led into doing unprofitable things as into attempt- 
ing those which are profitable. 

So long as the farmer is on virgin soils in a growing country with 
extending markets a knowledge of the ordinary farm practice of the 
locality serves his purpose very well. But the modern farmer does 
not live under such conditions. He lives, for the most part, upon 
deteriorated soils, in communities which seem to have gotten their 



76 AGRICULTURAL ECONOMICS 

growth. There are no longer new settlers coming in to make a home 
market for produce. It seems harder, for some reason, to get on. 
First of all, the farmer needs to know how to reduce the cost of his 
products. The prices he cannot control. He finds his margin of 
profit insufficient. His one resource is to reduce costs. The farmer is 
now only passing through an experience which all other industries 
have encountered, but from which until lately the American farmer 
has been exempt. When he inquires how costs of manufactured 
articles have been reduced, he will find that in every instance it is the 
work of scientific men — mainly engineers and chemists. When he 
understands this, he should at once be prepared to expect aid from the 
same source. And he is getting it from that source. All that we 
know as to commercial fertilizers we have learned from the chemists. 
The entomologists and botanists have learned the life-histories of inju- 
rious insects and fungi, and the chemists have compounded the ma- 
terials for combating them. The veterinarian and entomologist have 
located the cause of Texas fever in a parasite which the chemist has 
taught us how to destroy, as he long since taught us how to eradicate 
sheep scab. The physicist has learned how soils are formed, has 
definitely classified them according to the size of their particles, and 
discovered precisely how water behaves in the different classes. This 
aids the farmers who understand such things to plant and till crops 
with better judgment. 

But all this is only one aspect of the case. While the art of pro- 
duction is possessed in some degree by all farmers, very little is known 
by them of the science of marketing, and the art of maintaining busi- 
nesslike methods is hardly understood at all. In the matter of redu- 
cing costs, for example, very few farmers know the cost of anything 
which they produce. The subject of reducing the cost of a product 
can only be intelligently approached upon the basis of a record of the 
details of present costs. It is not necessary to enlarge upon this, for 
every farmer knows it. He does not keep these records in Amenca, 
because hitherto he has been able to live without it. A merchant who 
has no competition within fifty miles need not know his costs very 
accurately, for his selling price will be high enough to cover waste, 
but to the merchant in a busy town every item of cost is essential and 
is duly recorded. Increasing competition and deteriorating soils make 
this equally essential to the modern farmer. 

I must place, as not only first, but far more important than all 
other business information, the knowledge of what his competitor is 



THE PROBLEM OF AGRICULTURAL ECONOMICS 77 

doing. It is the most important thing for any business man to know. 
It is the matter about which most farmers never think. In so far 
as one knows the cost of his own products, those of his competitors, 
and the cost of the transportation which each must bear, he is fairly 
well equipped as a producer and seller. He can judge what it will 
pay him to produce. A wise producer also understands existing 
demand and seeks to learn whether he can profitably fill it. But, in 
addition to the mere question of marketing, the farmer's net income 
is affected in hundreds of ways by forces which he may, if he will, 
understand. Society itself is a product of an evolution not yet com- 
plete. Its development is proceeding according to natural laws, some 
of which, at any rate, we can perceive. The science which deals with 
these phenomena of society which most directly affect men's incomes 
is called "economics." It considers such questions as taxation, 
banking, co-operation, transportation, currency, commerce in all its 
forms, and kindred topics, many of them subject to political action. 
The farmer needs to understand these subjects as they really are, not 
only that he may think and vote intelligently, but that he may not 
wear his heart out in struggling with imaginary causes of evil or with 
economic tendencies which cannot be changed. A great part of the 
education which is the hope of the farmer lies right here. It is a part 
that has been too much neglected. 



II 

CONSUMPTION 

Introduction 

The attempt to gather materials on the subject of consumption is 
beset with serious difficulties. Most writers have directed their 
attention toward productive and distributive aspects of our economic 
life rather than toward those which have to do with the consumption 
of wealth. Some have analyzed the conditions of productive opera- 
tion and have attempted to formulate principles by which efficiency 
in wealth production may be achieved. Others have denned eco- 
nomics wholly in terms of the price-making process and have asserted 
that consumption has no part in this science of economics. From 
both these points of view the present writer would venture to differ. 

For even though the goal one sets up as the ultimate purpose of 
economic study be efficiency in production, the product must be 
measured, not in terms of goods as such, but in terms of satisfiers of 
human wants. If we desire to increase those satisfactions, two 
courses are open to us. One of these is to improve our means of pro- 
duction, so that more effective use is made of natural resources, human 
labor, and capital goods. But we must not forget also that we have 
another means to the same end, and that is by changing the character 
of our consumption. 

If, on the other hand, we choose to regard economics as the. 
science of the price-making process, consideration of the facts of 
consumption is not less important. For prices of goods must be 
made in accordance with consumers' estimates of their utilities, 
modified by the purchasing power which buyers derive from the 
incomes they receive as the price of their labor or for the use of 
their property — land or capital. We shall not get very far in either 
the theoretical understanding or the practical control of marketing 
activities without careful study of the phenomena of demand as 
created by the consumer. 

The aim of any rational consumption of wealth is to secure the 
greatest amount of well-being possible from limited resources. Evi- 

78 



CONSUMPTION 79 

dently, then, attention is not less needed in reviewing and, perchance, 
revising the consumer's demand for products of the soil than in 
improving the farmer's material and intellectual equipment for 
increasing their supply. As Professor Patten points out, a given 
amount of effort directed to one sort of food production will produce, 
let us say, twice as much of food value as the same amount of effort 
directed toward the growing of another article. This fact being 
known, mere common-sense dictates the selection of the product 
which makes the lighter demands upon soil, muscle, and equipment. 
Obviously, the acquiring and applying of knowledge as to which types 
of consumption impose the lightest burden upon agriculture are indis- 
pensable to our fullest prosperity. 

For example, let us say that we have a great working population 
who find it hard to make their labor produce enough of certain essen- 
tial food materials for their physical well-being. Under such condi- 
tions it is highly important to try to improve the character or 
organization of their productive labors so that they can raise more 
wheat for starch and more beef for protein, to improve their diet and 
thereby their bodily welfare. But it is no less important to examine 
the nature of our physiological needs and to analyze the properties of 
other than the conventional articles of diet, in order to find other 
products which will furnish these necessary substances, but in whose 
production the same amount of labor, land, and capital will secure a 
greater product than in the case of those formerly consumed. 

Undoubtedly we have been very extravagant in our use of many 
of the products of our economic labors. We used to put cotton-seed 
upon the land as fertilizer for the growing of other crops. Then we 
began to feed it to stock, for the production of meat. Now we are 
seriously broaching the question of consuming it directly in our diet, 
instead of using it in more roundabout and wasteful methods of 
securing human food. This effort is quite analogous to that of the 
manufacturer who is always seeking cheaper materials and more direct 
methods for the carrying out of his industrial process. It is distinctly 
an economic phenomenon, and as such should be included in our study. 

Furthermore, the man who is concerned only in securing the maxi- 
mum product 'from natural resources must realize that one of the 
factors in his problem is the desire or willingness of the public to con- 
sume this, that, or another particular, and perhaps unfamiliar, product. 
The latter part of selection 26a well illustrates this point. The writer 
suggests that lands adapted to raising grapefruit will be likely to 



80 AGRICULTURAL ECONOMICS 

remain waste lands unless the public can be persuaded to increase 
their consumption of grapefruit. The same may be said concerning 
other sections. Wisconsin bog lands are unsuited to ordinary types 
of farming, but if the cranberry be made a more important item in 
the customary family diet such lands become a productive resource, 
and our general agricultural efficiency is enlarged by so much. 

Such facts raise some very interesting issues. The producer seeks 
to divert the public's consumption to the particular article whose pro- 
duction would be most advantageous to him. In so far as this means 
the utilization of resources otherwise going to waste or unprofitably 
employed, a social as well as an individual gain results. But if, by 
skilful advertising, the grower causes his product to displace others 
produced at less social cost, his gain means others' loss. For this 
reason there is much need of wise instruction as to the consumptive 
value of the various articles offered the public for their selection. 
Each buyer should carefully consider the application of such general 
principles to his particular circumstances. It is worthy of note that 
the raisin-growers of California, in their $160,000 advertising cam- 
paign, thought it expedient to base their appeal on the food value of 
their product. The bases of the peach and citrus-fruit propaganda 
might well be scrutinized. 

But what shall, in the last analysis, be the standard of our judg- 
ments, determining our choices and rejections ? Are food analyses, 
with results stated in terms of calories, an adequate guide to the fullest 
satisfaction of food wants ? Starch and protein are not the immediate 
ingredients of human happiness, and a diet that the food chemist 
grades 100 per cent as a source of fuel and energy may stand much 
below par as a source of well-being to the individual consumer. In 
fact, " well-being" is not a term whose meaning is plain and well 
established. Rather, it is in process of slow adjudication in the court 
of popular opinion. Professor Patten seems oblivious to the fact that 
his choice of objective standards of consumption might not meet with 
general acceptance. If I object to the exclusion of all beverages, you 
possibly feel that the deletion of tobacco cannot be compensated by 
however large an increment of wheat or oats. Probably we both balk 
at rye bread, and find that every increase in the percentage of potatoes 
robs our lives of joy by a much more than proportionate amount. We 
are in practice convinced that a relatively costly diet finds a psycho- 
logical if not a chemical justification. But on the other hand, no one 
of open mind can avoid the perception that many of the costs incurred 
in connection with our accustomed schedules of consumption are due 



CONSUMPTION 81 

to ignorance of the relative qualities of different products or wilful 
blindness to the results of their use. The individual consumer, whose 
demand is the ultimate force in shaping the character of our agricul- 
tural production, remains surprisingly aloof from intelligent criticism 
of the worth (physiological or other) of his own personal or subjective 
estimates of want. The more ignorant he is the more does he insist 
on giving to those raw desires the objective form of dollars offered in 
the market. And against this "effective demand" no consideration 
of social cost can prevail. The individual farmer must follow the 
dictates of market price if he is to succeed in his commercialized enter- 
prise of farming. 

Whether as economic theorists or as practical producers and 
sellers of farm products, we have as yet done little more than scratch 
the surface of this question of consumption. But it is evident that 
the character of consumers' wants, the possibility of modifying those 
wants, the limits of that possibility, and the results which flow from 
one sort or another of consumption standards, are problems well 
worth the attention of whoever is interested in the business of agri- 
culture. Concrete evidence of the significance of this last point is 
given by the efforts of the "wet" interests to demonstrate that pro- 
hibition would mean widespread agricultural loss. 

But the farmer's personal problem of consumption is likewise 
worthy of attention. An income of one thousand dollars well spent 
will go a great deal farther toward securing the satisfaction of wants 
than a much larger sum badly spent. Taken in the large, the Ameri- 
can farmer has been deprived of the chance to learn how to spend. 
Going upon the land empty-handed, he has had to save and save, to 
devote the year's dividend to the accumulation of capital rather than 
to the increase of satisfaction through consumption. The pioneer's 
family curtailed its use of meat that the farm might be more rapidly 
stocked with cattle, or denied itself furniture that a mower or binder 
might be bought. The need for capital in agriculture was being 
increased through the very years that moneyless men were seeking to 
establish themselves as independent farmers on the lands of the United 
States. No praise is too great for the self-denial by which that needed 
capital was accumulated. But the situation of farm folk today is 
changed or changing. Such uses of income were productive expendi- 
tures, and now that the time has arrived when a new generation can 
clip the coupons from that investment the problem of how to spend 
shares in importance with that of how to save. 



82 AGRICULTURAL ECONOMICS 

At this juncture Professor Carver's distinction between an efficient 
standard of consumption and one that is merely expensive is worthy 
of serious attention. Purveyors of goods are alert to exploit the new- 
found purchasing power of the countryman. If spending follows the 
line of least resistance, it will doubtless be copied from the consumptive 
standards of the city. But many writers have deplored such an 
event, and maintain that the country must evolve for itself different 
canons of consumption derived from a shrewd examination of its own 
peculiar needs. City folk have outdistanced their country cousins in 
the matter of home comforts and sanitation ; they have larger resources 
of education, music, art, and social life. But they have also a stimulus 
to feverish competition in the matter of stylishly unserviceable and 
unbecoming clothes; and a monstrous machinery for making light 
and noise, endlessly to tease the nerves of urban dwellers and dull 
their taste for quieter enjoyments. Among these rival allurements 
the countryman needs to keep a steady head if he is to enrich his life 
most fully and avoid the dissipation of his resources in unreflective 
imitation of others' standards, or through limply yielding to any form 
of vigorous solicitation. 

The new consumption standards of the country may well hope 
to achieve a self-reliant eclecticism amid the wide variety of choices 
open to it. 

Note to Economists. — While conscious of the shortcomings of 
this chapter, the editor yet hopes that it may serve to show some 
significant bearings of this part of our subject upon the others. If, 
in addition to this, it should serve to start constructive thinking 
along these lines, its purpose would be fully served. It has seemed 
wiser to offer even an inadequate chapter than none at all. We can 
at least hold down the claim that the earlier economists staked out, 
against the day when someone shall come to cultivate it more produc- 
tively. 

A. General Principles 

19. ECONOMIC LAWS OF CONSUMPTION 1 
By HENRY R. SEAGER 

As one of the main divisions of economics, consumption treats of 
the relations between wants and the means to their gratification, 
goods. The characteristics of wants first demand attention. 

1 Adapted from Principles of Economics, pp. 70-87. (Copyright by Henry 
Holt & Co.) 



CONSUMPTION 83 

It is a familiar fact of human experience that wants are indefi- 
nitely numerous. Every day, in the consciousness of every normal 
person, many wants for commodities and services are felt which must 
of necessity go ungratified. Upon this simple fact is based the law 
that the consuming power of a community is indefinitely great. A 
second familiar characteristic of wants is that they are of very different 
degrees of intensity. This is realized as soon as one tries to arrange 
all the wants of which he is conscious in a scale according to their 
importance. Such an endeavor reveals also the difficulty of measur- 
ing wants and the complexity of those which direct daily life. Corre- 
sponding to every want that comes within the scope of economics is 
a utility or combination of utilities capable of gratifying it. The 
intensities of wants determine degrees of utility and thus, as is shown 
later, have great influence in fixing the values of the economic goods 
in which utilities are embodied. Variable as they are in intensity, all 
wants are subject to a law of gradual diminution and final satiety as 
consumption is continued. Upon this psychological principle is 
based an economic law of considerable importance, that of diminishing 
utility. We may formulate it as follows: the utilities of additional 
units of any good to any consumer diminish normally as his supply of 
units of that good increases. This law assumes, of course, that no 
change takes place in the character of the consumer as his supply is 
being increased. 

The normal purpose of consumption is to afford pleasure. Since 
each kind of good is subject to the law of diminishing utility, the 
pleasures of consumption may be increased by attention to the law 
of variety. If a man has only corn bread for breakfast, to satisfy his 
hunger he must push his consumption of it beyond the point where 
it affords him appreciable gratification. If to his corn bread are 
added bacon, eggs, and coffee, he will be able to supply his body with 
adequate nourishment without being obliged to eat corn bread after 
he has ceased to relish it. Eating has been taken to illustrate the law 
of variety because it is a universal experience, but the law applies 
equally well to other forms of consumption. It is really a corollary 
of the law of diminishing utility, since that law itself suggests the 
necessity of passing from one form of consumption to another to 
avoid the uncomfortable feeling of satiety. The ideal which the eco- 
nomic man should, and does unconsciously, have in mind is that of 
carrying each kind of consumption only to the point where it becomes 
less pleasurable than another form of consumption that may be 
enjoyed at the same expense. By changing to the new form of 



84 AGRICULTURAL ECONOMICS 

consumption whenever it affords the more pleasure he is able to get 
the maximum gratification permitted by his income. 

The great obstacle to varied consumption is the expense of a 
varied assortment of goods, and this is felt most keenly where men 
live in comparative isolation. Homesteaders in the western part of 
the United States, and others in similar situations, have to content 
themselves with rough and simple fare, clothing, etc., because it does 
not pay them to make, in the small quantities adapted to their wants, 
those little things which contribute so much to the refinement of life. 
Every advance which tends to bring people into closer industrial rela- 
tions is favorable to a more varied consumption and consequently to 
an increase in well-being. Recent improvements in transportation 
facilities and means of communication encourage the hope that the 
varied markets of the city will one day be brought within the reach 
of every country family, while the city families will be given opportu- 
nities to share the free goods of the country. Such an arrangement 
will add enormously to the general well-being. 

A third aspect of consumption involves its relation to production. 
It is important, by attention to the laws of varied and harmonious 
consumption, to obtain the largest possible return from the stocks of 
goods available for consumption. It is equally important, while 
securing a given return of pleasure from consumption, to select those 
goods which can be produced with the least expenditure of effort. 
This is the law of least social cost. Its first application has reference 
to the natural conditions of a country. 

Economic progress depends in part on the adaptations of men's 
wants to the productive capacities of the particular regions which 
they inhabit. When colonists settle in a new country they bring 
with them a taste for the commodities they were used to at home. 
The soil and climate of their new environment are rarely suited to 
the production of these identical things, and hence their well-being 
depends for some time on the readiness with which they learn to like 
things for which the new soil and climate are suited. But men do 
not give up settled habits easily. They waste much time and effort 
in trying to make the land produce what they like in place of learning 
to like what the land can best produce. Thus in America it took the 
early settlers a long time to substitute a diet of Indian corn for the 
diet of wheat and rye to which they had been accustomed in Europe, 
and many of their early disappointments were due to their unsuccess- 
ful efforts to produce the grains of the Old World. 



CONSUMPTION 85 

A second application of the principle of least social cost refers to 
differences in the capacities and tastes of producers. The things that 
people want and are willing to pay for are the things that must be 
produced. As consumers, the members of society determine how they 
shall, as producers, spend their time and effort. As regards the 
necessities of life, consumers have perhaps no very great range of 
choice. They must learn to like those things that can be produced 
most easily in the given environment. But only a part of the com- 
munity's income is spent for necessaries. If it prefers as comforts 
and luxuries articles which can be most advantageously produced in 
factories where automatic machinery impresses its standards of 
unvarying uniformity, not only upon the product turned out but 
also upon the operatives engaged in making these products, then the 
ranks of factory labor must be crowded and other occupations must 
be neglected. A community's taste thus gives direction to its work 
and decides for better or for worse the kinds of lives that its members 
shall live. 

The law of least social cost has still another application. The 
principle that large-scale production is more economical than small- 
scale production is subject to important exceptions. In some cases, as, 
for example, in the production of agricultural products from a limited 
area, after cultivation has been carried to a certain point to secure 
more products requires more rather than less proportionate labor. 
From the viewpoint of social cost, it is obvious that increased consump- 
tion of articles of this sort is less advantageous than increased consump- 
tion of commodities whose cost decreases as the quantity grows. 

The aspect that it is important to note, in connection with all 
these applications of the law of least social cost, is that the reductions 
of cost which may be secured by a simple change of wants involves 
no corresponding reduction in the pleasures of consumption. Con- 
sumers continue to be as well off as before, while producers are better 
off. Thus changes in wants may add to economic well-being just as 
effectively as changes in methods of production and are quite as 
worthy of the attention of economists. 

The most obvious relation between consumption and production 
grows out of the fact that consumers are also producers, and what 
they eat, drink, and wear, the houses they live in, and the amusements 
they enjoy have a determining influence on their efficiency. At this 
point attention will be called merely to the economy of different lines 
of expenditure, especially expenditures for food. 



86 AGRICULTURAL ECONOMICS 

Through ingeniously devised experiments physiologists have 
attempted to ascertain the amount of nutrition which a normal man 
requires when engaged in different kinds of work. It is customary to 
express this as so many calories of heat energy, including so many 
grams of the indispensable protein, or tissue-building compounds. 
The daily allowance made for the average man at moderate muscular 
work by the late Professor Atwater, an American authority in this 
field of investigation, was 3,500 calories, including at least 125 grams 
of protein compounds. Men at hard labor and athletes in training 
require more, while brain workers appear to require somewhat less. 

Having established a standard, the next step is-to analyze differ- 
ent kinds of food to ascertain their nutritive value. Economical 
consumption is secured when the cheapest combination of foods con- 
taining the required ingredients, and both palatable and digestible for 
the given consumer, is selected. No general rules can be laid down, 
because of differences in the tastes and incomes of the different con- 
sumers, but it is interesting to note the relation in which the food 
values of different foods stand to their cost. Professor Atwater drew 
up a table giving the quantity of each of several kinds of food which 
might have been purchased for ten cents on a given day in New York 
City, and the amount of nutrition which each contained. From this 
it appears that, from the point of view of protein contents, the most 
economical foods were preparations of wheat, corn, beans, oatmeal, 
beef for stewing, and salt cod, while, from the point of view of poten- 
tial heat energy, the most economical were wheat flour, commeal, 
oatmeal, potatoes, beans, salt pork, and sugar. The table seems on 
the whole to bear out the common impressions that a vegetable diet 
is much more economical than a diet consisting largely of meat, and 
that the cereals, wheat, corn, beans, and oats, are the most economical 
of the vegetables. While the results of Professor Atwater 's investi- 
gations are highly suggestive, his conclusions are not universally 
accepted. More recent experiments have shown that a smaller 
amount of food, fully masticated, will maintain a man in fullest vigor. 
The difficulty of standardizing methods of cooking and of eating — 
both very important — makes absolutely precise conclusions in this 
field unattainable. 

The subject of consumption may be looked at economically in 
two different ways. The more familiar way is to regard it as the goal of 
economic activity and to show how the desire for goods causes them to 
have value and price and induces people to engage in industrial pur- 



CONSUMPTION 87 

suits. Though perfectly valid so far as it goes, this aspect of con- 
sumption must not be exaggerated. The other way of looking at it 
is as a means of restoring energy. The consumption of goods neces- 
sary to efficiency is not merely an end ; it is a means to further pro- 
duction. Human beings are not mere goods-consuming automatons. 
They enjoy activity for its own sake, and the more highly developed 
they are the more they are likely to look upon goods as means to the 
forms of activity they prefer rather than as ends in themselves. It 
follows that desire for goods is only one, if the most important, of the 
motives which control the economic man. Desire for activity is 
another motive, which in individual instances quite outweighs the 
desire for goods. 

20. THE DYNAMICS OF WEALTH 1 
By F. A. WALKER 

Many, indeed most, economists have declined to recognize con- 
sumption as a department of political economy; but I cannot but 
deem it a subject of much regret that the fascinations of the math- 
ematical treatment of economic questions, and the ambition to make 
political economy an exact science, should have led to the practical 
excision of the whole department of consumption from so many recent 
works. For, after all, the chief interest of political economy to the 
ordinary reader, its chief value to the student of history, must be in 
the explanation it affords of the advance or the decline in the produc- 
tive power of nations and communities. It is in the use made of the 
existing body of wealth that the wealth of the next generation is deter- 
mined. It matters far less for the future greatness of a nation what 
is the sum of its wealth today than what are the habits of its people 
in the daily consumption of that wealth — to what uses those means 
are devoted. 

Malthus has shown us that population will go on increasing as fast 
and as far as food is provided to support it, all increase of wealth 
surely taking the form of an increase of numbers unless other and 
more imperative demands are made upon the income of the family. 
But let us suppose that, at the point where a competent subsistence 
is provided to maintain the whole population in health and strength 
to labor, and in freedom from all discomfort, resulting from privation 

1 Adapted from Political Economy, pp. 293-317. (Copyright by Henry Holt 
&Co.) 



8S AGRICULTURAL ECONOMICS i 

of things absolutely necessary, the want of something beyond this 
comes to be strongly felt by the individual members of the community. 
Whatever be this passion or desire it makes a demand upon the exist- 
ing body of goods, or upon the current production of wealth, which at 
once antagonizes the strong and urgent disposition to the consumption 
of wealth in the support of an increasing population. Whether this 
change in the character of consumption shall be made or not is a 
question upon the answer to which depends the whole economic future 
of the community. 

Until an adequate and sufficiently persistent check upon popula- 
tion has been secured the economist who fully appreciates the con- 
sequences of overpopulation can hardly fail to recognize almost every 
economic want, whatever its origin or its object, as better than none. 
It has been from this point of view that the English writers have 
insisted so strongly that cheap food is a thing to be deprecated. Pro- 
fessor Thorold Rogers says: "A community which subsists habitually 
on dear food is in a position of peculiar advantage, when compared 
with another which lives on cheap food, one, for instance, which lives 
on wheat, as contrasted with another which lives on rice or potatoes: 
and this, quite apart from the prudence or incautiousness of the 
people." 

These economists recognize the strong probability, the almost 
certainty, that a people will carry their increase closely up to the 
limits of subsistence according to the kind of food they use, whatever 
that may be. It may be the lowest and cheapest, like rice in India 
and potatoes in Ireland. The failure of the crop means starvation, 
no adequate reserve being expected to be provided on a sufficient scale 
by the population of any country. If the kind of food be higher and 
dearer, the masses may, in the event of a failure of the crops concerned, 
fall back for the time upon the lower and cheaper. 

But suppose this danger of the increase of numbers, fast following 
up subsistence, crowding all the time upon the limits of food, to be 
once for all past. Suppose we have a community which will accept 
the opportunity of living upon cheap food and apply the saving to 
the permanent enlargement of their capital, or to other forms of 
enjoyment, to dress, to better lodgings, to luxuries, perhaps to expen- 
ditures upon education and culture. What harm, then, in cheap food, 
be it potatoes or rice or the Indian corn of America ? Surely none. 
The more is saved from the cost of food the more can be spent upon 
making homes ample and comfortable, healthful and decent ; the more 



CONSUMPTION 89 

can be spent upon schoolhouses and churches, upon books and periodi- 
cals, upon literature and music and art. The wife may be let to stay 
at home and keep the house; the children be given their time to 
acquire an education and to secure for themselves a thorough prepara- 
tion for their work in life. 

Let me not be understood as quarreling with this potato philoso- 
phy of wages so far as the assumption which underlies it, viz., that 
population will inevitably keep close up to the limits of subsistence 
on the kind of food, whatever that may be, which forms the popular 
diet, is justified by the facts of society, as it very widely is. I only 
claim that, in any country whose people had shown the capability of 
setting bounds to the increase of population by the exercise of their 
own judgment and will, cheap food would become a means of increasing 
the comforts and luxuries enjoyed by that people in other directions 
of expenditure, or of enlarging the capital and improving the produc- 
tive agencies at their command. 

As a means of checking the increase of numbers, which otherwise 
would surely carry population to the point of misery^ famine, and 
pestilence, the appearance of almost any economic want must be 
greeted as a good, without much respect to the origin or object of 
that want. But the moment the capability of self-limitation of popu- 
lation is assured, the economist discovers wide differences between the 
various demands for the consumption of the existing body of wealth, 
made by the differing appetites and desires of different communities, 
or of different classes in the same community, as regards the influences 
of those various forms of consuming wealth upon the power and dis- 
position to create values in the future. 

It is here we find the body of economic literature most deficient. 
We need a new Adam Smith, or another Hume, to write the economics 
of consumption in which would be found the real dynamics of wealth; 
to trace to their effects upon production the forces which are set in 
motion by the uses made of wealth; to show how certain forms of 
consumption clear the mind, strengthen the hand, and elevate the 
aims of the individual economic agent, while promoting that social 
order and mutual confidence which are favorable conditions for the 
complete development and harmonious action of the industrial system ; 
how other forms of consumption debase and debauch man as an eco- 
nomic agent, and introduce disorder and waste into the complicated 
mechanism of the productive agencies. Here is die opportunity for 
ome great moral philosopher, strictly confining himself to the study 



oo AGRICULTURAL ECONOMICS 

of the economic effects of these causes, denying himself all regard to 
purely ethical, political, or theological considerations, to write what 
shall be the most important chapter of political economy, now, alas, 
almost a blank. 

21. FOOD NEEDS AND FOOD HABITS 1 
By C. F. LANGWORTHY 

It is often said and is generally believed that we have a generous 
diet in the United States and that the range in variety of food prod- 
ucts is unusually large. Our dietary results from many customs 
and food habits of the races which have helped to make up our 
population, but in its general character it is British, as is natural, 
for the bulk of the earliest settlers were from Great Britain and 
brought the customs and manners of the old home with them, 
adapted them to the new country, and passed them on to the 
succeeding generations. 

It is by no means unusual to find misstatements regarding foods 
and food habits, which only too often pass without question. If 
really reliable information regarding the food of a family or a race is 
wanted, it must be secured by means of carefully conducted studies 
of the kind and amount of food eaten, the results being so expressed 
that they may be readily compared with other similar data. Euro- 
pean investigators began about 1850 to collect such information 
regarding dietetics and to reduce it to chemical terms. American 
investigators followed the lead of European scientists, Professor W. O. 
Atwater being a pioneer in the work, and a great deal of information 
was accumulated regarding the foods eaten by individuals and groups 
living under different circumstances. 

Foods are used in the body in two ways, namely, to build and 
repair body tissue and to furnish the body with the energy required 
for maintaining vital processes and for muscular work. The body 
cells, which make up all the organs and tissues, contain nitrogenous 
materials as an essential; hence foods containing this element are an 
indispensable part of the diet. Nitrogenous foods, such, for instance, 
as lean meat, egg white, the wheat gluten, etc., contribute also to the 
energy value of the diet, but the body depends for its energy very 
largely upon fats and carbohydrates, a given quantity of fat, for 

1 Adapted from "Food and Diet in the United States," Yearbook of the Depart- 
ment of Agriculture, 1907, pp. 361-78. 



CONSUMPTION 91 

instance that of butter, yielding two and one-fourth times as much 
energy as a like amount of carbohydrates, such as starch, sugar, etc. 

In the methods usually followed in expressing the results of 
dietary studies the functions of food, as expressed above, are had in 
mind, and the results attempt to show the value of the daily ration as 
a tissue-former and an energy-yielder. The results of dietary studies 
and the dietary standards deduced from them have been very com- 
monly expressed in terms of protein, fat, and carbohydrates. It is, 
however, simpler to express the results in terms of protein and energy 
only, and this is now more usually done, as these factors give data 
regarding both functions of the diet and constitute the simplest basis 
on which different foods, rations, standards, etc., can be compared. 
The proportions which are usually consumed in the American diet 
are not far from 150 grams fat, and 350 grams carbohydrates, per 100 
grams protein. 

The results of dietary studies made throughout the United States 
do not indicate any probability of general undernutrition, but it can 
be said with equal fairness that there were many opportunities for 
improvement as regards the rational selection of foods, economical 
preparation and use, and similar lines. The waste in the average 
American home ranges from nothing to as high as 20 per cent of the 
food purchased. A fair average would be about 10 per cent. 

A summary of data based on the results of about 400 studies of 
the diet of the average American home indicate that: 48 per cent of 
the total protein is supplied by animal foods; 52 per cent of the total 
protein is. supplied by vegetable foods; n per cent of the total fat 
is supplied by vegetables; 26 per cent of the total fat is supplied by 
milk and cream; 42 per cent of the total fat is supplied by pork and 
lard. 

Meats and poultry together furnish about twice as much protein 
as the other animal foods, and beef and veal together furnish about 
half the total amount supplied by the entire group. 

Other things being equal, the cost of the daily food is determined 
by the proportion of the total expended for such stable articles as 
bread, meat, butter, eggs, and common vegetables and the expendi- 
ture for accessory foods, such as expensive fruit, out-of-season vege- 
tables, fancy sweets, etc., which, as ordinarily used, contribute nunc 
to the attractiveness of the diet than they do to its nutritive value. 
For instance, a New Jersey workingman's family in comfortable cir- 
cumstances had a total expenditure of $34 . 95 for food during a certain 



92 AGRICULTURAL ECONOMICS 

period. Of this, $5.16, or 14.8 per cent, was paid for oranges and 
celery, which together furnished only 150 grams protein and 6,445 
calories of energy or about 1 per cent of both total protein and total 
fuel value. During the same period the expenditure for cheaper 
vegetables and fruits, such as potatoes, cabbages, sweet potatoes, 
apples, canned tomatoes, canned peaches, etc., was $5.75, and this 
funished 1,909 grams protein and 58,000 calories of energy. The 
expenditure of $5 . 16 for cereal foods and sugar furnished 3,375 grams 
protein and 184,185 calories of energy, or about 25 times the amount 
supplied by the celery and oranges. The oranges and the celery 
undoubtedly added to the attractiveness of the diet, and nothing can 
be said against their use, provided the cost of the diet is reasonable in 
proportion to the family income. It is true, however, that such foods 
could have been omitted from the diet without materially changing 
its nutritive value, while the cost of the daily food would have been 
considerably lowered; or other articles perhaps equally attractive but 
of lower cost might have been used in place of the oranges and celery. 

It is in the combination, with due reference to economy, of staple 
articles, many of which are lacking in distinctive flavor, with foods 
and dishes which possess marked flavor that one of the greatest oppor- 
tunities for skilful management in the household occurs. 

Another problem of importance is the ease and economy of prepa- 
ration of food in relation to its cost. A cheap cut of meat, like 
shoulder clod, cannot be so readily served in attractive form as a 
choice steak. The cheaper cut requires much longer cooking and 
consequently more fuel and labor, and to be at its best should be 
cooked with seasoning vegetables or prepared in some similar way 
which secures flavor. Other cases like this are too well known to need 
mention. True economy consists in so adjusting such matters to the 
family income that palate and purse may each have its due. 

The housewife who can appreciate and apply the available knowl- 
edge regarding the relative cost of different methods of cookery, 
fitting combinations of food, the relation between composition and 
cost, and similar factors can supply wholesome diet suited to her 
family needs at a much more reasonable cost than is the case when 
such knowledge is disregarded. 

The problems of economy in living differ in town and country. 
The farmer's ^e has her vegetables, fruits, poultry, dairy products, 
etc., without a cash outlay, while the housewife in the city must pur- 
chase everything. Considering market facilities, however, and the 



CONSUMPTION 93 

prices which must be paid for many staple and fancy foods, the 
advantage with respect to such foods seems to lie with the careful 
buyer in the large town or city. The small town, with its garden and 
other opportunities for home production of food products, is, of course, 
midway between the city and country. Each region has its attrac- 
tions and its special advantages, but the underlying principles with 
respect to economical home management are the same in every 
locality. It is with a view to helping the producer to provide the 
food supplies which are most needed and the housewife to solve her 
problems that studies of the kind and amount of food eaten, the rela- 
tive nutritive value of different foods, the comparative economy of 
different methods of cooking, and related questions have been under- 
taken by this department. 



B. The Relation of Public Consumption to the Farmer's 

Production 

22. "CONSUMPTION OF MEAT ENCOURAGES AGRICULTURE" 1 
By ARTHUR YOUNG 

Whatever a people principally consumes for their subsistence must 
be the great object of the husbandman in his culture : thus in France, 
where bread, I apprehend, forms nineteen parts in twenty of their 
food, corn, and especially wheat, is the only great object of cultiva- 
tion, vines answering to our barley. In England, on the contrary, 
the quantity of meat, butter, and cheese consumed by all ranks of 
the people is immense — to a much greater value, I should suppose, 
than that of wheat; hence, cattle to our farmers is an object as 
important as corn. Thus the husbandmen in France keep scarcely 
any cattle, addicting themselves almost entirely to corn; in England 
vast quantities of cattle are kept. This circumstance, I should appre- 
hend, would, if everything else was equal, give a prodigious superiority 
to the English agriculture. 

Let us consider on what principles the farmers of the two countries 
must necessarily manage their lands. In England they keep such 
part of their farms in meadow and pasture as are by the nature of the 
soil so adapted; they throw their arable land into such courses of 
crops that several are introduced which are either summer or winter 
food for cattle. Under this system the quantity of dung raised is 

1 Adapted from Political Arithmetic (1774), PP- 158-61, 163, 



94 AGRICULTURAL ECONOMICS 

very great, which being spread, as it usually is, on the arable fields, 
insures good crops — so much better than if such stocks of cattle were 
not kept that I question if three acres are not as productive as five 
would be. 

I Now let us turn to the Frenchmen : their two most general courses 
are, (i) Fallow, (2) Wheat, and (1) Fallow, (2) Wheat, (3) Barley or 
Oats. Wheat being in France the great object, all the expense is 
applied to that; a year's fallow is given, and what little dung they 
raise is all spread on it. The little demand for meat, butter, and 
cheese necessitates the farmer to apply all his land to corn — the con- 
sequences of which are he pursues a bad course of crops, the products 
are small, and profits comparatively nothing. 

It must surely be evident to everyone that there is a great advan- 
tage to the English farmer from corn and cattle being in equal demand, 
since he is thereby enabled to apply all his lands to those productions 
only to which they are best adapted, and at the same time the one 
is constantly a means of increasing the product of the other. Nor is 
the advantage by any means confined to the husbandman : the state 
is intimately concerned. A much greater value is drawn from the 
earth; the farmer's profit is greater, consequently he is wealthier, and 
more able to work improvements and at the same time to pay his 
landlord a great rent: points of vast importance to the national 
interest. 

23. UNWISE CONSUMPTION MEANS COSTLY PRODUCTION 1 
By S. N. PATTEN 

If it takes fifteen bushels of wheat to make bread enough to last 
one man a year, and if an acre of land will raise only fifteen bushels, 
it is plain that if a man have only half an acre he must raise something 
else than wheat or go hungry. So long as a community having land 
of this kind live on wheat we could say with certainty just how many 
persons its land will support. There could only be as many men as 
there were acres of land. If, without substituting a more productive 
crop for wheat, they should use one-sixth of their land to raise tobacco, 
the number of people would be reduced by one-sixth. Should they 
now acquire a love for beer and use a second sixth of the land to raise 

1 Adapted from Consumption of Wealth, 2d ed., 1901, Publications of the Uni- 
versity of Pennsylvania, Series in Political Economy and Public Law, No. 4, 
pp. 52-59. 



CONSUMPTION 95 

barley and hops, there would be one-third less population than there 
was before these habits were formed. 

The principle holds when other articles than wheat are produced. 
Upon an acre of land only so much rye, corn, or potatoes can be 
grown. And as the quantities of the crops are fixed by the kind of 
soil and the means of cultivation at hand, an acre of land under given 
conditions will support only so many people. In short, population 
increases with every change to more productive crops and is checked 
by a growing demand for rarer articles or useless luxuries. 

In the earlier stages of civilization the land problem is usually the 
only vital question. It is true that even primitive men have wants 
which the products of the soil cannot gratify; yet these products so 
nearly satisfy all their desires that there is no conscious opposition 
between the interests of such men, except for the possession of land. 
If the population exceeds the number which can be supported upon a 
given area of land cultivated in a crude primitive fashion, there is no 
solution of the difficulty except by war, famine, or emigration. 

With every increase of population there must be a modification 
of the desires of the people, through which their accustomed wants 
become less intense than some new wants which can be satisfied with 
a less demand for land. When a hunting tribe occupies a region, each 
individual must occupy many thousand acres to enable him to secure 
enough deer, buffalo, or game to supply his family. When the demand 
for food becomes changed from the wild to domestic animals, a quarter 
of the former space will afford room for the flocks and herds necessary 
to supply the same family. A crude cultivation of the soil can accom- 
pany another modification of the desires, which create a demand for 
cereal productions ; and with this change comes another large reduc- 
tion of the quantity of land which each family requires. Every sub- 
sequent change by which population and production have been 
increased has been following some change in the demand for food. 
The demand for some well-known article of diet has fallen off, or at 
least has been relatively reduced, and in its place some new article 
is substituted which allows a better use to be made of the land. 

There is thus the most intimate relation between the desires of 
a people and their demand for land. Only as the desire for less expen- 
sive food grows can the opposition between the individual interests of 
different men be lessened. As we progress in civilization, we arc 
obliged to adjust ourselves so that in our eating, drinking, and clothing 
we make less demand on land. Every family must occupy a smaller 



96 agricultural economics 

space and modify their diet so that their demand for food can be satis- 
fied upon the smaller tract to which they are now limited. 

For this reason the laws of consumption are of prime importance 
in studying the direction along which the pressure of population forces 
the development of mankind. Those individuals or races who have 
an abnormal desire for the rare kinds of food must give way to their 
competitors, who can satisfy their appetites with articles of which 
nature grants a more abundant supply. Those families whose habits, 
tastes, or fancies cause them to reject a large portion of the food supply 
are surpassed by others who, through a better adjustment to the con- 
ditions of nature, have a love for all that variety which nature can 
provide. Strong appetites limit the diet to those articles which can 
best satisfy an intense desire for food. Weak appetites are so easily 
satiated with any one kind of food that many articles must form a 
part of the regular diet in order that enough may be eaten to meet 
the demands of the system. Families of weaker appetites are thus 
better adjusted to the conditions which increase production and create 
that variety in demand which allows the best use of all the land. As 
any tract of land can produce a variety of articles at less cost than it 
can the same quantity of some one or any few articles, the struggle 
for existence favors those who can get pleasure from all kinds of food 
more than those who have an intense desire for a few of the rarer kinds. 

The facts which have been presented will, if properly correlated, 
furnish the key to the present misuse of land and the high price of 
food. Cheap men, who have inherited the strong appetites of their 
primitive ancestors, are yet so numerous that they create a large 
demand for land through their love of rare foods and stimulating 
drinks. The same causes retard the accumulation of capital, through 
which, alone, the inferior land can be changed into good land. As a 
result, a much larger area of land must be cultivated than would other- 
wise be necessary, and the higher price of food needed to cultivate so 
much inferior land without the use of the necessary capital takes a 
large part of the product of industry from the producers to go as rent 
to the owners of the better land. Dear food means a poor use of 
much land, while cheap food means a good use of a little land. 

For this reason the public has the paramount interest in the use 
made of the land, and a right to restrain those forms of comsumption 
which create a larger demand for land and destroy its fertility. The 
use of liquor and tobacco causes the land of whole states to be diverted 
from its best use, and its soil made valueless through the loss of its 



CONSUMPTION 97 

productive elements. The mere waste of land is of less consequence 
than the diverting of other lands from their best use, and the scatter- 
ing of the population over an immense area through which they are 
kept from enjoying the best fruits of modern civilization. 

The interest of the public in the use of the land is already a well- 
recognized right. We would allow no one to shut up our rivers, or 
prevent the building of railroads, so as to keep the public out of the 
newer states. Nor are we willing that the cattle barons of the West 
should fence in large tracts of land for their especial advantage. 
There is, of course, a great need of beef; but the cheaper foods are 
of much more importance, and beef-raising must not stand in the way 
of a better use of the land. There is even much complaint because 
settlers are shut out of little Oklahoma, because the Indians do not 
cultivate the land. Yet if the Indians and cowboys are not allowed 
to exclude others who would make the land more useful to the public, 
the habits and instincts of the cruder portion of our population should 
not be permitted to waste a much larger portion of our country, and 
make the rest of it much less available for public and private uses. 

The demand for land, which the diet of different persons in the 
nation creates, is of vital importance in determining which class will 
be displaced by the increase of population. Hunting tribes have no 
chance of success in opposition to those who graze cattle; and the 
latter are in turn easily expelled by the cultivators of the soil. And 
among the more civilized races, that class which makes the best use 
of the land has an advantage over all others. The family who need 
twenty acres to supply their wants cannot compete with a family who 
get their food from ten acres. The increase of population cuts down 
the number of acres which each family can have, and necessitates the 
use of more productive crops. The relative quantities of the rarer 
articles are thus reduced, while a greater variety in consumption is 
secured. 

This fact will be the determining force in deciding the growing 
contest between the temperance and liquor parties in this country. 
The diet of abstainers creates a less demand for land than does that 
of those who have a love for liquor and tobacco. The latter class 
not only need twice the land that the same number of the former class 
does, but they also have double the temptation to spend their earnings 
foolishly. Abstainers will thus gradually acquire a larger share of 
the land and capital of this country and force the drinking class into 
the less favored occupations, where their rate of increase will be 



98 AGRICULTURAL ECONOMICS 

reduced. There is no way in which the users of liquor and tobacco 
can hold their own, when their habits impose upon them so great an 
economic burden. The temperance people will increase in numbers 
and wealth until they are able to crowd out or suppress their oppo- 
nents. Their advantage is as great as that of the power loom over 
the hand loom or of the railroad over the canal. Of the ultimate 
result of such a conflict there can be no doubt. The only question 
is whether drinkers shall be forced to reform or gradually be crushed 
beneath the weight of their growing disadvantage. 

24. AGRICULTURE AND THE LIQUOR INDUSTRY 1 

Never before have brewers, maltsters, distillers, and wine-makers 
made so large a contribution to the agricultural prosperity of the 
country as during the fiscal year 19 13. In the course of that year — 
the latest for which reliable statistics are available — grain and other 
farm products to the value of $113,513,971 were used in the manu- 
facture of liquors, and this amount does not represent the value of the 
products so used as reported in the markets of Chicago, Cincinnati, 
Buffalo, Philadelphia, and other commercial centers, but the actual 
sum received by the growers, based upon the carefully compiled 
reports on farm prices issued from time to time by the United States 
Department of Agriculture. 

The full significance of this amount, which represents, it may be 
stated, a return of 5 per cent on an investment of $2,270,279,420, can 
best be appreciated if we compare it with the reports of the last 
United States Census on the total values of the crops of certain typical 
states, which show that it exceeded the total combined crop values 
in the census year of Vermont, Maryland, and West Virginia; of 
Massachusetts, Rhode Island, New Jersey, and Florida; of Louisiana 
(with its great cotton and sugar interests), New Hampshire, and Utah, 
or of Maine, Connecticut, Delaware, Nevada, Arizona, New Mexico, 
and Wyoming. The figures for these states, as given in the Thirteenth 
United States Census (1910), Vol. V, p. 545, are as follows: 

Vermont $ 27,446,836 Louisiana $ 77,336,143 

West Virginia 40,374,776 Utah 18,484,615 

Maryland 43,920,149 New Hampshire 15,976,175 



Total $111,741,761 Total $111,796,933 

1 Yearbook of the United States Brewers' Association, 1914, pp. 265-67. 



CONSUMPTION 99 

Massachusetts $ 31,948,095 Maine $ 39,317,647 

Rhode Island 3, 937, 07 7 Connecticut 22,487,999 

New Jersey 40,340,491 Delaware 9,121,809 

Florida 36,141,894 Nevada 5,923,536 

■ ■ Arizona 5,496,872 

Total $112,367,557 New Mexico 8,992,397 

Wyoming 10,022,961 



Total $101,363,221 

The $113,513,971 worth of farm products used in the production 
of distilled spirits and fermented liquors consisted of barley to the 
value of $55,236,641, corn $30,924,335, wheat $869,938, rice $7,288,786, 
hops $11,155,215, rye $4,604,476, molasses $2,056,626, fruit $751,835, 
and other agricultural products, primary and secondary, not included 
under the head of corn, $626,119. 

The total farm value of the products used in the production of 
fermented liquors was $87,520,287, or 77.1 per cent of the total 
amount used for the production of alcoholic beverages of all kinds, 
and that of the products used in the production of distilled spirits, 
$25,993,684, or 22 . 9 per cent. Each barrel of beer yielded the farmer 
$133 . 98, being 79 . 58 cents for barley, 23 . 97 cents for corn, 1 . 33 cents 
for wheat, n. 16 cents for rice, 17.08 cents for hops, and 0.86 cent 
for other products. These amounts do not include transportation, 
commission, insurance, or, in the case of barley, the cost of malting, 
but, as already stated, are the net prices received by the growers. 

COST OF FARM LABOR 

The reports of the last United States Census (see Vol. V, pp. 560- 
64) show the amount expended for farm labor to have averaged 11.88 
per cent of the total value of the crops produced . Applying this ratio 
to the $113,513,971 worth of farm products used by brewers and dis- 
tillers in 1913, it will be seen that their production involved a total 
payment for farm labor amounting to $13,485,460, a sum sufficient 
for the employment of 74,919 persons for six months at an average 
wage of $30 per month. 

THE MARKET AND THE FUTURE 

Our complete figures show that there are three states (New 
York, Pennsylvania, and Illinois) in each of which between ten and 
twenty millions dollars' worth of farm products were used in the 



ioo AGRICULTURAL ECONOMICS 

production of distilled spirits and fermented liquors in 19 13 ; rive states 
(Ohio, Indiana, Kentucky, Wisconsin, and Missouri) in which the 
quantity so used represented a farm value of between five million and 
ten million dollars, and nine (Massachusetts, Connecticut, New 
Jersey, Maryland, Michigan, Minnesota, Louisiana, Washington, 
and California) in which it ranged from one million to five million 
dollars. While these states led all their sister-states in the use of 
grain and other farm products in the production of alcoholic liquors, 
not any of them were fully equal to supplying their own require- 
ments. All of them, without exception, were dependent on other 
states for one or another of the materials used — in many cases for 
malt or malting barley, in others for rye, in nearly all for hops 
and rice. 

There is, in fact, no state that does not share in the immense 
benefit accruing to the agricultural industry from the large annual 
consumption of farm products by brewers and distillers. A state 
may even have few or no breweries or distilleries within its own bor- 
ders, and yet the annual value of its farm products is increased by 
reason of the never-failing requirements of the liquor industry as 
inevitably and unmistakably as it would be by the opening of a new 
market for one hundred and thirteen million dollars' worth of similar 
products. 

What, then, it may well be asked, would be the effect upon the 
agricultural industry of the closing of this great and ever-growing 
market, a market that can always be relied upon for stability and 
uniformity? (The per capita consumption of both tea and coffee 
varies more widely from year to year than does that of spirits or 
fermented liquors. See Statistical Abstract of the United States, 
1913, pp. 512, 516.) While the farm products used in the production 
of spirits and fermented liquors are of so diversified a character that, 
as already pointed out, the entire country shares in the benefit that 
comes from there being a constant market for between one hundred 
and ten and one hundred and twenty million dollars' worth annually, 
their production is at the same time so localized that its extinction 
would fall upon certain sections of the country with all the weight of 
a calamity. If one crop could be readily substituted for another, even 
in that case the economic disturbance that would result would be 
more or less serious. But it is only within comparatively narrow 
limits that such substitution can be made. Peculiarities of soil and 



CONSUMPTION 101 

still more of climate determine where barley and hops and rice and 
sugar shall be grown, and not cotton or wheat or something else. 

The American farmer is not wanting in resourcefulness, but it 
would not be without grave embarrassment and heavy financial loss 
that he would find himself deprived of a market for products that 
within the next two or three years will be worth, at the present rate 
of increase, $125,000,000 per annum. 

Note. — Opponents of the liquor business have, of course, not 
failed to point out that there are other demands for the farmers' prod- 
ucts which would fill the gap left by the .forcible curtailment of 
brewers' and distillers' demand. The purchasing power of the public 
would not be reduced, but might even be increased, if changed habits 
of consumption brought greater bodily efficiency. — Editor. 

25. CHANGES IN DIET 

a) AWAY FROM MEAT 1 
By J. RUSSELL SMITH 

As population advances and increases, there is a tendency for us 
to change the nature of our food supply. In new countries we grow 
a crop, feed it to the animals, and then eat the animals and their 
products. As population increases, we tend more and more to eat 
the plant products ourselves. As this change comes, the tree crops 
advance more and more toward the exact filling of our needs. The 
physicians, the "cures," and the health-food faddists are more and 
more calling us away from meats and grains and high cookery to the 
diet of nuts and fruits. The table of food values shows that the nuts 
far outrank flour and even eggs and meat in protein, and that they 
also furnish fat and carbohydrates. To keep such highly concen- 
trated food from doing injury, the fruits furnish the necessary bulk, 
succulence, and acids. In the Mediterranean countries the tree farmer 
with his olive orchard and its oil, has already given us tree-grown 
butter, which, by the way, keeps, while the more expensive animal 
product promptly spoils. Incidentally it is very significant that 
Italian olive oil is cheaper now in American cities than American 
butter is, and our olive industry has barely started. The nut-trees 
show us equally good substitutes for meat and bread, while the fruit- 

1 From Harpers Magazine, January, 1913, p. 2S0. 



102 AGRICULTURAL ECONOMICS 

trees give us fruit. It is quite generally claimed by anatomists that 
the human digestive tract was made by and for a diet of fruit and nuts, 
which, therefore, are even now likely to be our most normal diet. 

b) COTTONSEED MEAL AS HUMAN FOOD 1 
By G. S. FRAPS 

The use of cottonseed meal as a human food was proposed several 
years back. For example, breads, etc., prepared from cottonseed 
meal were served to certain members of the Farmers' Congress held 
at College Station, Texas, some years ago. 

The agitation for the use of this substance as a human food has 
recently been extended and has attracted considerable attention. 
Cottonseed breads and other edibles made from cottonseed meal have 
been placed upon the market at Brenham, Longview, and especially 
at Ennis, Texas. Mrs. Dan McCarty, of Ennis, Texas, claims to be 
the first and only purveyor of cottonseed flour, bread, and cakes, and 
her products have attracted considerable attention. Mr. J. W. 
Allison, who has been agitating this matter for some time, induced 
Mrs. McCarty to place this cottonseed flour bakery upon the market, 
and the experiment appears at present to be successful. The follow- 
ing products are being sold: cottonseed bread, cottonseed rolls, 
cottonseed steamed bread, cottonseed gingerbread, cottonseed ginger 
snaps, cottonseed doughnuts, cottonseed Jeff Davis plum pudding. 
Samples of certain of these goods, and also of the cottonseed flour, 
have been kindly furnished to us by Mr. Allison. 

Cottonseed flour as made by Mr. Allison is cottonseed meal which 
has been specially treated, so as to remove the hulls as thoroughly as 
possible. It is also finely ground. Cottonseed flour should be free 
from hulls, of a bright yellow color, and with a pleasant odor and a 
sweetish taste. 

The bakery products which we examined had a yellow or brown 
color, and a pleasant taste. They are, in all respects, entirely pala- 
table. What was left after the samples were taken for analysis 
was eaten by the various members of the laboratory staff and by 
visitors. 

The yellow or brown color is, of course, not noticeable in ginger 
snaps or gingerbread. The color cannot fail to attract attention to 
the lightbread, or steamed bread. This color may be considered 

1 Adapted from Bulletin 128, Texas Agricultural Experiment Station, pp. 5-14- 



CONSUMPTION 103 

objectionable by some. We do not believe, however, that attempts 
should be made to bleach the cottonseed meal. Bread made from 
cottonseed meal is different in nutritive value from ordinary bread, 
and it is well that the color should call attention to this fact. 

Cottonseed meal could be used to replace meat in any diet, in the 
proportion of one ounce of cottonseed meal to two ounces of meat. 
The daily ration should not exceed two or three ounces. 

Cottonseed meal could be used to increase the protein ration of 
those who are at present consuming quantities below the standard. 
The southern negro who lives upon fat meat and corn bread eats con- 
siderably less protein than is called for by Atwater's standards. The 
addition of cottonseed meal to his diet, at the rate of about two 
ounces a day, would improve his ration in this respect. 

Negro families in Alabama eat only 62 grams protein per man per 
day, on an average, living largely upon fat meat and corn meal. Some 
consume as low as 16 to 24 grams protein per man per day. Atwater's 
standards call for 125 grams per day for moderate work. According 
to Chittenden, a low protein diet makes for muscular endurance: 
Cottonseed meal introduced into such diets as referred to above would 
increase the protein at a very moderate cost. It is to be hoped that 
attempts will be made to introduce it in such diets to some extent, in 
order that we may secure practical experience of its qualities and food 
values. A mixture of five parts corn meal to one part cottonseed meal 
could be used. 

Other classes of people living on a low protein diet, according to 
Atwater's standards, are: poor families in New York, consuming 
93 grams protein per man per day on an average; laborers in Pitts- 
burgh, consuming 80 grams; Mexican families in New Mexico, 94 
grams; Italian mechanics in Naples, average 76 grams. 

There are other classes of laborers, particularly in foreign countries, 
whose daily ration is deficient in protein, according to our dietary 
standards. The addition of cottonseed meal to their daily ration 
would improve it in this respect. 

Summary and Conclusion 1 

1. Cottonseed meal or flour contains about four times as much 
protein as eggs and three times as much as beef loin. Cottonseed 
meal food products made from one part cottonseed meal and four 

1 From Bulletin 163, Texas Agricultural Experiment Station, by J. B. Rather. 
pp. 25-26. 



104 AGRICULTURAL ECONOMICS 

parts wheat flour contain from one-third less to one-third more 
protein than eggs, depending on the amount of water in the bread. 
Cottonseed meal is, therefore, a meat substitute and not a flour 
substitute. 

2. Seven digestion experiments were made with men, three being 
with cottonseed meal, two with cottonseed flour, and two with meat. 

3. The digestibility of the protein of cottonseed meal averaged 
77.6 per cent and that of cottonseed meal-flour 78.4 per cent, as com- 
pared with 96.6 per cent for the protein of meat. The protein of 
cottonseed meal and that of cottonseed flour is equally digestible. It 
is eight-tenths as digestible as that of meat and nine-tenths as digest- 
ible as that of cereals, and equally as digestible as that of peas and 
beans. 

4. The digestibility of the fat of cottonseed meal and flour appears 
to be very high. The fats are probably digested about 95 per cent 
and the carbohydrates about 68 per cent. The fat of meat was 
digested 99 per cent. The fat of cottonseed meal seems to be more 
completely digested than that of cereals, and practically the same as 
that of meat. The carbohydrates of cottonseed meal are about 
seven-tenths as digestible as that of cereals. 

Cottonseed meal and flour contain twice as much' digestible pro- 
tein as beef flank, three times as much as eggs, and twice as much as 
mutton. Cottonseed food products made from one part cottonseed 
meal and four parts wheat flour contain from one-third to less than 
one-half more digestible protein than eggs. The digestible fat and 
carbohydrates of cottonseed meal, calculated as fat, are nearly equal 
in amount to that of beef flank, and more than equal to that of beef 
loin and mutton leg. 

6. In these experiments the needs of the body for protein were met 
with a daily ration of approximately two ounces cottonseed meal or 
flour, one-half gallon milk, and eight ounces corn meal. If the milk 
were removed from this ration, about twice as much cottonseed meal 
and corn meal would have to be fed to maintain the protein in the 
bodies of the subjects. 

7. A number of recipes for cottonseed food products are given. 
These foods were equally as palatable as similar ones made from corn 
meal or wheat flour. 

In preparing cottonseed cakes or bread, use one part cottonseed 
meal or flour to four parts corn meal or wheat flour, and use the same 
recipes commonly used for wheat and corn bread and cakes. 



CONSUMPTION 105 

8. A pound of digestible protein is twenty-one times as expensive 
in eggs, and fifteen times as expensive in meat, as it is in cottonseed 
meal. 

9. One part of fresh, sweet meal, sifted free from hulls and lint, 
should be used mixed with at least four parts of corn meal or wheat 
flour. Diluted in this way few people will be able to eat more than 
two ounces of cottonseed meal daily. Cottonseed meal should not be 
eaten in addition to meat, unless it is known that too little meat is 
being eaten. 

C) POTATOES IN PLACE OF BREAD 1 

If wheat remains at its present high figure or continues to rise in 
price, and if there is a corresponding increase in the price of bread, 
scientists in the department suggest that the ordinary household will 
find it advantageous to eat more potatoes and less bread. With 
potatoes at 60 cents a bushel, 10 cents' worth, or 10 pounds, will give 
the consumer a little more actual nourishment than two 1 -pound 
loaves of bread at 5 cents each. The protein and fat are present in 
appreciably larger amounts in the bread, but the .potatoes will be 
found to furnish more carbohydrates and more heat units. 

Carbohydrates (starch) contribute greatly to the energy value of 
any diet, and since potatoes are rich in these, families that wish to 
expend their money to the best advantage are recommended to con- 
sider whether they cannot make a more extended use of them. They 
are easy to cook and when prepared in different ways can be made 
to lend variety to the winter diet when green vegetables are hard to 
obtain. Like other foods relatively rich in carbohydrates, however, 
potatoes should be eaten with foods correspondingly rich in protein, 
such as milk, meat, eggs, etc., and with foods like butter, cream, and 
meat fat to supply the fat that the body needs. 

Under normal conditions in Europe and America the potato ranks 
next to bread as a carbohydrate food. If prices change sufficiently to 
make it desirable from a financial point of view, there is no scientific 
reason why potatoes should not be substituted to a great extent for 
bread. In addition the potato, like many fruits and vegetables, helps 
to neutralize an acid condition in the body. This is another reason 
for its being eaten in combination with meat, fish, and other animal 
foods. 

1 From Weekly News Letter to Crop Correspondents, March 10, 10 15. 



106 AGRICULTURAL ECONOMICS 

d) USE OF CHEAPER FOOD 1 

By G. F. WARREN 

As our population is becoming larger we are being forced to use 
cheaper kinds of food. Beef is one of the most expensive foods 
because so much feed is required in order to produce a pound of it. 
It has been estimated that a given amount of grain will support five 
times as many persons as will the meat grown from it. As population 
increases, the price of grain rises faster than does the price of meat. 
During the last ten years corn has risen in price much faster than 
have steers. This is the reason why farmers are not raising more 
beef. The childish suggestion that each farmer should raise two steers 
a year would result in a very much higher cost of living if farmers were 
foolish enough to follow the advice. This advice ignores the fact that 
we cannot eat the grain and also produce beef from it. Laws are often 
introduced in Congress and in state legislatures to prohibit the killing 
of heifer calves, in the apparent assumption that calves live on air. 
The food in the milk that it takes to produce a given amount of veal 
will support more persons than will the veal. The longer the calf is 
fed on milk the less is the supply of human food. The comparative 
prices offered for the milk and for the veal produced from it are 
measures of the comparative need of the city for these products. 
Hence, calves are not kept long except where milk is cheap. Few 
cattle are raised except where feed is cheap. 

A given amount of feed will produce much more human food in 
milk than it will in beef. Dairy cows are therefore increasing about 
as rapidly as population. We keep a little more than one cow for 
five persons. In addition to milk, this number of cows provides about 
one veal or one old cow or bull for beef for each family each year. 

Hogs are much more efficient users of food than are steers. A 
given amount of grain will produce many more pounds of pork than 
it will of beef. For this reason hogs are increasing in number while 
beef cattle are decreasing. 

Poultry are very efficient users of food. As meat rises in price, 
more eggs are used. From 1890 to 1910 the population of New York, 
Chicago, Boston, St. Louis, Cincinnati, San Francisco, and Milwaukee 
increased 78 per cent whereas the receipts of eggs increased 183 per cent. 

When population becomes very dense, roughage and waste prod- 
ucts will be used for producing milk and we shall raise only as many beef 
cattle as can be kept on the remaining supply of roughage and pasture. 

1 From Bulletin 341, Cornell Experiment Station, pp. 202-3. 



CONSUMPTION 



107 



26. MODIFYING THE CONSUMER'S DEMANDS 

a) STIMULATING THE CONSUMPTION OF CITRUS FRUITS 1 

The Most Useful Fruit 

Here are some facts about lemons that all housewives They use lemon juice almost entirely in place of vine- 

don't know, and they mean a great deal to your family. gar, as most famous chefs do today. They insert two 

In your own interest, don't pass this page until you learn halves of lemons in fish and bake them with the fish to 

what they are. ****** get a delicious flavor. 

Lemons are used in hundreds of thousands of homes in They use lemon juice to flavor innumerable other 

four times as many ways as you probably use them. That's foods. And the lemon flavor predominates in homemade 

because hundreds of thousands of housewives have found sweets. 

out through experience about their household convenience Try using more lemons in the 86 ways exp lained in the 

and healthfulness. Sunkist Lemon Book. See what you can do with lemons 

S_ in your home to make the household work easier and to 

# better the family's health. 

The" World's finest lemons — Sunkist — are 
^ ^ ^^^k I y^ T ^^ T™ grown in California — the more reason why 

l^f I ^^ I American housewives should use them to the 

1 M 1^^ M *_jJ \r utmost of their possibilities. 

For Sunkist are picked by gloved hands 

under sanitary conditions, washed by machin- 

T"'/ 11/ 7 7* I") l T ery, and sent to your dealer tissue wrapped. 

1 he Worlds tiest Lemons th™ you** theme*** 

/-n/^w/xi im A*/ii-r>n~A Theyarepracticallyseedless,firm,juicy,and 

GROWN IN AMERICA full flavored, with a beautiful color and bright, 

waxy appearance — no finer 
lemons were ever grown. 



OTHER USES 

Sunkist Lemons or their juice can be 
used also — 

To make tough meats tender. 

As a liver tonic , diluted with water. 

As a mouth wash, slightly diluted. 

As a cleansing agent, for hands and 
face. 

As a tonic for the scalp, in a shampoo. 

For the complexion. 

In the bath. 

To soften water. To make clothes- 
washing easier. 

To remove stains. 

To clean silver, brass and glassware. 

Complete directions for these uses and 
scores of others are given in our free 
lemon book. Just send a postcard for it. 



Recipe for Sunkist 
Lemon Pie 

Mix one and one-fourth cups of sugar 
thoroughly with one-third of a cup of 
flour and a little salt. Grate a little of 
the rind from a Sunkist Lemon and mix 
with the juice of the whole lemon and 
add to the sugar. Beat three egg yolks 
well, stir in a scant cup of water and 
blend carefully with the sugar and lemon 
mixture. Pour all into a pan lined with 
flaky pie-crust (preferably a pan that is 
perforated or made of wire), add a table- 
spoon of butter cut into bits, and bake in 
moderately hot oven. 

Make a meringue of three eg-g- whites and half 
a cup of powdered sugar, with a teaspoon of 
lemon juice. Heap onto the pie (after baking) 
in large spoonfuls and brown slowly. Serve 
when cooled. 



Save Sunkist tissue wrappers for beautiful silver premiums. 
Ask for the Premium List and directions. 



So 
see that you get SUNKIST. 

Foods 
Made 
Delicious 
With 
Lemons 

Be sure to send for our free 
recipe book and try the de- 
licious dishes described: pies, 
ices, cakes, cookies, puddings, 
jellies, beverages, candies, etc. 
This book will surprise you 
■ — you'll regard lemons as in- 
dispensable when you know 
the many ways to employ 
them. 



California Fruit Growers Exchange 

CO-OPERATIVE- NON-PROFIT 

Try these incomparable Orange Recipes. We will send "Sunkist Salads and Desserts," 
a beautiful New Book — Just Out — to every housewife who mails this coupon 

The book is printed in full colors and describes many delightful ways to serve Sunkist Seedless Navel Oranges. The 
recipes were created, tested and tried by Helen Armstrong, the famous domestic science expert. Dishes even one-half 
so dainty and delicious are suggested in no other book of recipes that we know. 

Here are new things — new uses for oranges — that you probably have never tried. Charming salads and enticing 
desserts that the entire family will enjoy. All are inexpensive. All are easy to make. 

1 Clipped from current magazines. 



108 AGRICULTURAL ECONOMICS 

Selection 26a) Continued 
"Owing to the phenomenal growth of the citrus industry," con- 
tinued Mr. Chase, "we must create a larger market for our fruit, 
especially grapefruit, and we look to the transportation companies to 
help us do it. There are thousands of acres of land in Florida good 
only for grapefruit. If growers are unable to sell their products, this 
land probably will be valueless. I believe the transportation com- 
panies should cut their rates to the smallest possible profitable margin 
so that we shall be able to put our fruit within the reach of the poor 
man. We cannot expect to get rich by selling to the wealthy class, 
and if the Florida grower makes money we must be able to send our 
fruit to the markets and be able to sell it at a lower figure in order that 
we may create a larger demand and also to dispose of all that is raised. 
I predict that within five years the state of Florida will be shipping 
14,000,000 boxes of grapefruit alone, and it is because of this increase 
that we advocate a reduction of freight rates and a broadening of 
the markets." 

b) PUBLICITY FOR THE PEACH 1 
TO THE PEACH GROWERS OF THE UNITED STATES 

The real test of your business ability is at hand. 

If you were a manufacturer of an automobile, patent suspender 
button, breakfast food, or any other thing that you wanted to sell 
to the public, you would be rated as mentally incompetent if you did 
not let the consuming public know what you have. 

And you would let them know through a well-planned, scientific 
advertising campaign. 

But here you are, with one of the biggest peach crops in the history 
of the United States hanging on your trees, your investment of millions 
of dollars in orchard property waiting for a reasonable dividend, and 
not a thing has been done to tell the American public that peaches 
are on the bargain counter. 

The thing- to do is for every peach growers' organization, every 
large shipper — in fact every factor interested in the production and 
marketing of peaches — to authorize his sales agent to deduct 1 cent 
per package from the proceeds of each car, the said 1 cent per package 
to be sent to a central committee, chosen by large fruit growers' 
organizations, and this fund judiciously expended, under the counsel 
of such a committee, in advertising peaches. 

1 Both these readings are from The Packer, a prominent weekly newspaper of 
the produce trade. The first is an advertisement of a large selling agency, July 23, 
1915; the other a news story of September 3, 1915. 



CONSUMPTION 109 

Not Your peaches, or My peaches, or Any Individual Brand 
of peaches, but "Peaches." Let the housewives of the United States 
know that never before has such an opportunity existed to buy at a 
low price the most superb quality and grade of fruit. Peaches for 
breakfast, peaches for dinner, peaches for supper. Peaches canned, 
peaches preserved, peaches brandied, peaches pickled. 

It is astounding what a comparatively small amount of money, 
judiciously expended, in the big city dailies, street car cards, bill- 
boards, and other media will do. 

This is not an advertising talk. I hold no brief for the newspapers, 
for the street cars, or any other advertising proposition, but I do hold 
a very deep interest in the welfare of the peach industry; and that 
there is a probable crisis at hand, every well-informed fruit man 
knows. One Cent, spent in the right direction to increase the con- 
suming demand, will return to the grower Five, Ten, or Twenty 
cents in cold cash, through better returns. 

It is not the main crop that breaks the market, it is the surplus 
above normal requirements. An advertising campaign of reasonable 
proportions would stimulate sufficient increased demand to take care 
of that surplus that breaks the market, and sustain the whole market 
on a fair price level. 

There are plenty of good peach salesmen, whether they be com- 
mission merchants, fruit distributors, or brokers, it matters not. This 
is no recommendation that you use any particular sales channel. Use 
whatever connection you have found to be satisfactory in the past. 
This presentation of facts has nothing to do with the marketing 
problem, other than to center the attention of the peach producers 
throughout the country on the fact that they are overlooking one of 
the most vital necessities in their business. It has a bearing not only 
on this year's crop but on every crop. 

Am I right or am I wrong ? I should like to have an expression 
by wire and mail from every progressive fruit producer or shipper who 
is interested in taking up this matter for definite and immediate action. 
This movement should be non-partisan, and should recognize every 
legitimate factor in the business. All should pull together. Every 
large consuming center should be developed to its maximum consum- 
ing capacity, to take care of the crops of peaches now hanging on the 
trees in Michigan, New York state, Ohio, Virginia, West Virginia, 
Maryland, New Jersey, Connecticut, Arkansas, Missouri, Colorado, 
and the West. 



no AGRICULTURAL ECONOMICS 

PUSHING PEACHES 
Week of September 13 May Be Declared as "Peach Week" 

New York, September 3, 191 5. — The Peach Growers' Publicity 
League, which organization came into being a few weeks ago for the 
purpose of disseminating information on the peach crop so that the 
consumer would know that there are plenty of peaches, at reasonable 
prices, to be eaten, canned, and preserved, is making much headway. 

There is a movement on foot now to try to get the Office of Mar- 
kets to endorse the third week of September as "peach week." This 
department of the government has entered into the work of advertising 
peaches with commendable vim. Late last week the department 
issued something like 30,000 circulars to retailers of fruits and vege- 
tables throughout the eastern and middle-western states. The cir- 
cular stated that there were 5,598,000 bushels of peaches more this 
year than there were last and pointed out the fact that peaches were 
grown to eat, and, among other things, handed out this advice: 

Move peaches fast! Start your campaign immediately! 

Use peaches as "leaders," handling large quantities of them on a small 
margin. This attracts the housewife, results in quick sales, reduces loss 
through decay, and increases your profits. 

In every practicable way encourage your trade to buy in the original 
package for canning. Display crates and bushels in your store so that 
both the color and the price will be appealing. Every peach canned means 
more sugar sold, and when the fruit is disposed of in the original package 
it is easily and quickly handled with little waste. 

Advertise peaches. Herald the big crop and the low prices. Urge 
your customers to can enough for two seasons. Insist on good stock from 
your wholesaler. There is plenty of it. 

The press-agent department of the campaign is in the hands of 
Mrs. Julian Heath, the president of the National Housewives' League. 
Mrs. Heath has a great reputation as a press agent, so much so that 
the daily papers are hardly passing an issue without something about 
what the Housewives' League is doing to push the consumption of 
peaches. The league is said to have 800,000 members and Mrs. Heath 
is advising all the members to can their peaches now. 

The Peach Growers' Publicity League is getting out the advertis- 
ing matter in the form of placards and circulars. It has disposed of 
thousands of big pasteboard signs. Bunches of this literature have 
gone out to growers in the country with instructions to ship them 
back to their commission merchants with their [continued on p. 112] 



CONSUMPTION 



in 



c) A RAISIN U AD" 



A NATION OF CHILDREN 

Want Raisin Bread Life This 



Bread filled with big, meaty, tender raisins, 
with all the seeds extracted — raisins containing 
that pure fruit-sugar that all children crave and 
need. 

Bread that is a grain- food plus fruit-iood, the 
tastiest, most healthful food they know. 

Bread that is digestible, mildly laxative, and 
of which they can eat their fill. 

You can get such raisin bread now at your 
dealer's. No need to bake at home. 

It contains luscious, Sun-Maid Raisins, the 
finest raisins California grows. Perfect in flavor. 
Rich in food value. Being concentrated nutri- 
ment, it is one of the cheapest foods you can 



serve. It adds delicious variety at a trifling 
cost to otherwise plain meals. 

We have arranged with thousands of bakers 
to use Sun-Maid Raisins in a special raisin 
bread, baked after a prize recipe which we 
furnish. 

You can probably get it from your baker, 
with the label which marks the genuine Cali- 
fornia Raisin Bread made with Sun-Maid 
Raisins. 

Serve it and see how they like it — hear them 
ask for it at every meal. Such bread as this 
will solve the appetite problem of many a poorly 
nourished child. 

Why let any child go without it ? 



California Raisin Bread 

MADE WITH SUN-MAID RAISINS 

Is Sold by your Baker or Grocer 

If he hasn't it send us his name and address. He'll be glad to supply you when he knows Sun-Maid quality 



1 Lb. of Raisins Contains More Calo- 
ries of Food Value Than a Pound 
of Sirloin Steak 

One pound of raisins contains 1,635 energy 
units. One pound of steak contains 1 ,530. Eggs, 
considered the standard of food value, pound 
for pound produce only one-half the energy. 

Write for beautiful book showing 179 ways 
to use Sun-Maid Raisins — in cereals, sandwiches, 
salads, pies, puddings, cookies, cakes, sweet- 
meats, and frozen desserts. 

We'll send this book FREE in reply to a 
postcard bearing your grocer's name and ad- 
dress. Send for it now, and learn how raisins 
can cut down your living cost. 



Sun-Maid Brand for Home Use 

Sun-Maid Raisins are made from choice 
California white grapes — kinds too delicate to 
ship. We select them from the cream of the 
crop and sun-cure them in the open vineyards. 

They taste like confections, yet they cost no 
more than common raisins do. 

Three varieties: Seeded (seeds extracted), 
Seedless (made from seedless grapes), Cluster 
(on stems, not seeded). One-pound packages. 
Ask your dealer today for a package. See 
how good these raisins are. 
CALIFORNIA ASSOCIATED RAISIN CO. 
915 Madison St., Fresno, California 
Membership, 6,000 Growers 



Raisins areNature's Candy— GOOD for Little Folks 




112 AGRICULTURAL ECONOMICS 

consignments of peaches. The Housewives' League is distributing its 
share among the retail dealers and the Office of Markets is also 
putting out these signs. 

The National Housewives' League has instituted daily demon- 
strations on how to can peaches. This was quite well advertised 
locally and the housewives appeared at the headquarters of the league 
in crowds this week for the purpose of learning the various ways of 
canning and preserving the fruit. Demonstrations are made by an 
expert in the employ of the Department of Agriculture. 

The Peoples Market, a new place in the Bronx, opened this week, 
gave the Housewives' League free space in which to sell peaches to 
the consumer. [Selection 26c) on p. in.] 

27. RESULTS AND LIMITATIONS OF SUCH EFFORT 

a) INDICATIONS OF INCREASED CONSUMPTION 1 

Fresno, Cal., September 3, 191 5. — Coast advices are to the 
effect that the shipments of raisins to consuming centers at this time 
are unprecedentedly heavy for the season. The fact that more 
raisins are being shipped and consumed this year then ever before, 
even though prices are on a reasonable basis and higher than they 
have been at some times in the past, quite conclusively proves that 
consumers are beginning to realize the particular food value of raisins, 
and their pleasing flavor as well. 

During the past year hundreds of new ways for the use of raisins 
have been published. The effect of this has been to give the increased 
consumption of raisins which is now so evident. The use of raisins 
is, after all, largely a matter of education. There is probably no 
article of food which is so universally relished as raisins. This being 
the case, all that is necessary to gain a very large consumption is to 
educate the user to the many ways that can be used conveniently. 

The California Associated Raisin Company has very recently 
announced its advertising campaign for 191 5. This campaign is very 
largely one of education, more than one of selling. 

Some years ago the Grecian government instituted an advertising 
campaign for the purpose of increasing the consumption of raisins and 
of currents. This advertising was immediately successful, just as 
has been the case with the California advertising, and the annual per 
capita consumption of this class of food in England was increased to 

1 From The Packer. 



CONSUMPTION 113 

five and one-half pounds. There would seem to be no reason why the 
American consumption should not be as great, excepting that the 
supply would not permit of this. 

Fresno, Cal., October 1, 1915. — Reports generally are that the 
raisin-advertising propaganda is producing remarkable results. The 
bakers are taking hold of the raisin-bread idea generally, as it seems 
to offer an opportunity for larger profits than is the case with plain 
bread, and the consumer demand for it develops almost without 
effort. Likewise a very large demand is building up for the Sun- 
Maid brand package of seeded raisins, as a result of this extensive 
advertising plan, all of which merely proves that in modern business 
there is no force as powerful as advertising. 

Chicago, October 22, 191 5. — National Apple Day was celebrated 
here Tuesday and the trade made a big showing. One of the features 
used in advertising was a parade in which a string of wagons, con- 
tributed by South Water Street merchants, passed through the 
crowded loop district loaded up with a supply of Jonathan apples, 
which later were given to inmates of hospitals, orphanages, old people's 
homes, and schools. 

The carload of fruit, which was donated for the occasion by the 
American Apple Association, contained several hundred thousand 
apples. The parade consisted of twenty-five wagons. The horses 
were decorated with crimson ribbons and pennants which were lettered 
with Apple Day mottoes. On the sides and over each wagon were 
placards informing the thousands who packed the streets that 
"Health's Best Way" was to "Eat Apples Every Day." 

Chicagoans showed more genuine interest in aiding apple dealers 
in their effort to popularize the fruit and help in the disposition of 
this year's crop than was primarily expected by promoters of the day 
and parade here. Richard J. Coyne, who was chairman of the apple 
publicity committee, and who did most of the work to make the day 
a success, stated that it proved a success far beyond his expectations. 
He said that he distributed more than 25,000 red Apple Day badges 
and everybody who got them wore them. 

Thousands of boxes and barrels, mainly for eating purposes, were 
on sale at prevailing prices and buyers purchased freely late last week 
and Monday. The Apple Day boom here created a special demand, 
which was shown by the fact that all hotels and cafes bought large 
quantities and served them in all styles — and everybody ate apples 
in one form or another. 



114 AGRICULTURAL ECONOMICS 

Los Angeles, Cal., May 13, 1916. — G. Harold Powell, general 
manager of the California Fruit Growers' Exchange, recently re- 
turned from an eastern trip and reports general conditions for the 
orange interests of California the best they have been for years. 
Mr. Powell believes that new outlets have opened up for the dis- 
tribution of California oranges and lemons, and that the demand is 
increasing because of the quality of the fruit. He is also quite opti- 
mistic in regard to the lemon situation. 

b) REACHING THE LIMIT 1 

PEACH WEEK AT CHICAGO 

Fruit Advertised and Special Prices Established — Demand Increased 

Chicago, August 13, 1915. — Peach week was celebrated here this 
week. Special prices, attractive placards, and publicity in the daily 
papers were featured among the activities of those behind the cam- 
paign. Mayor Thompson issued an official proclamation declaring 
this to be peach week, and urging the co-operation of the public. 

A special price to the consumer of $1 . 50 per bushel was made and 
was posted on all the placards and displayed in the retail stores. 
Arrangements were made along South Water Street to sell the grocers 
at $1 . 25 per bushel. Housewives were urged to take advantage of the 
heavy movement at the present time and save money through buying 
by the bushel. 

Dealers along the street declared that the publicity undoubtedly 
aided the demand a great deal, and said that an increase was felt in 
the inquiry for peaches. A good many of them, however, claimed 
that grocers took advantage of the fact that a special price had been 
set and made an effort to buy at lower than $1.25, some of them 
forcing the price down as low as $1 on good fruit. In a general way, 
however, the idea proved a help to the situation and gave peaches a 
lot of advertising that should result in an increased use of the fruit 
from now on. 

CHICAGO HAS PEACH GLUT 

Chicago, September 17, 1915. — Peach dealers found it rather 
difficult to clean up every day this week owing to the fact that the 
market was overstocked with all varieties of peaches. Prices were 
very low and dealers asserted that this condition this year was brought 

1 From The Packer. 



CONSUMPTION 115 

about because of the early heavy southern peach crop. Thousands 
of persons here canned the southern goods instead of waiting for the 
arrival of the later Michigan crop. 

"It hasn't been the heavy receipts that kept down prices, but it is 
obvious to me that the people have been peached to death," one 
prominent handler declared. It was evident at this market that 
everybody had become tired of peaches, and only stock of the finest 
quality had any demand. 



C. The Administration of Farm Income 

28. SOME ITEMS OF THE FARMER'S LIVING 1 
By W. C. FUNK 

It is what the farm furnishes directly toward the living expenses 
of his family which enables the farmer to get along, even though his 
crops are poor or the loss on his live stock eats up his profits. Food 
and shelter are the important requisites of life, and a good proportion 
of these necessaries are furnished by the farm in addition to the income 
derived from the sale of farm products. The labor income is therefore 
not the limiting factor in determining how much the farmer shall 
have to eat, but it is of the wage-earner in the city. 

The three important elements furnished by the farm for the family 
are food, fuel, and the use of a dwelling. Food is the most important 
of these. Of the total value of products and privileges furnished by 
the farm, food equals 62 per cent; house, 30 per cent; and fuel, 8 per 
cent. 

In the southern states the values of food products furnished by 
the farm are appreciably higher than in the northern states, owing 
to the long growing season for vegetables and to more meat being 
furnished by the farm for home consumption. 

In the southern states less fuel is needed than in the other states. 
In the Texas area the farm •furnished only a small portion of the fuel 
used, most of the farmers buying both wood and coal. 

In Table I the average values per family of food, fuel, and use of 
house are shown by states. The general average of these items fur- 
nished by the farm per family is $421 .17. This amount represents a 
very valuable contribution of the farm toward the farmer's living, 
and in many cases is no doubt greater than the labor income received 

1 Adapted from Farmers' Bulletin 63s, pp. 1-9. 



n6 



AGRICULTURAL ECONOMICS 



from the farm. It should be remembered that these same products 
and privileges would cost considerably more in a city. 

TABLE I 

Average Annual Value of the Food, Fuel, and Use of a Dwelling Furnished by the Home 
Farm to 483 Families in 10 Representative Agricultural Districts 





Number 

of 
Families 


Persons 

in 
Family 


Food 


Fuel 


House Rent 


Total 


State 


Per 

Family 


Per 
Person 


Per 
Family 


Per 
Person 


Per 

Family 


Per 
Person 


Per 

Family 


Per 
Person 


North Carolina. 

Georgia 

Texas 


55 
50 
44 
46 
5i 
46 
44 
43 
55 
49 


4-5 
5-4 
5-3 
4-5 

4-4 

4-2 

4-1 

5-2 

4.0 

4.8 


$330.65 
376.03 
275.62 
292.48 
297.28 
209.44 
248.28 
201.69 
189.60 
192.43 


$ 73-47 
69.65 
52.00 
65.00 
70.80 
47- 60 
60.57 
38.80 
47-40 
40.10 


$ 41.87 $ 9 
5i- 60 9 
4-13 
17-97 4 
30.20 7 
35-8o 8 
30.50 7 
17.91 3 
53.8o 13 
63-40 13 


30 
56 
7S 
00 
20 
14 
44 
44 
45 
21 


$ 56.00 
92.00 
83.00 
116.00 
158.00 
130.00 
172.00 
163.00 
188.00 
9300 


$ 12.45 
17.04 
15-66 
25.80 
37.62 
29-54 
42.00 
31.34 
47.oo 
19.38 


$428.52 
519-63 
362.75 
426.45 
485.48 
375-24 
450.78 
382.60 
43I-40 
348.83 


$ 95-22 
96.25 
68.44 
94.80 

115.62 
85.28 

no. 01 
73.58 

107.85 
72.69 


Kansas 


Wisconsin 

Ohio 

Pennsylvania. . . 

New York 

Vermont 


Total or 
average . . 


483 


4.6 


$261.35 


$ 56.54 


$ 34-72$ 7.65 


$125.10 


$ 27.78 


$421.17 


$ 91-97 



It is not possible, for want of certain data, to show what relation 
the house rent, food products, and fuel furnished by the farm bear to 
the income received by the farmer. It is interesting, however, to 
note what proportion of the necessary living expenses is furnished by 
the farm as free goods and what proportion has to be bought. 

Table II shows the relative amount of food, fuel, light, and shelter 
furnished by the farm. It will be noted that the value of the articles 



TABLE 11 

Average Annual Value of the Food, Fuel, and Oil Bought by the 483 Families Included 

in Table I 





Num- 
ber of 
Fami- 
lies 


Per- 


Food 


Coal 


Wood 


On. 


Total 


State 


sons 

IN 

Family 


Per 

Fam- 

ily 


Per 
Per- 
son 


Per 

Fam- 

ily 


Per 
Per- 
son 


Per 

Fam- 

ily 


Per 
Per- 
son 


Per 

Fam- 
ily 


Per 
Per- 
son 


Per 

Fam- 

ily 


Per 
Per- 
son 


North Caro- 


55 
50 
44 
46 
5i 
46 
44 
43 
55 
49 




$ 71.28 
104.42 
213.47 
I57.4I 
146 . 43 
143 ■ 25 
124.98 
190.32 
186.71 
169.17 


$15.85 
19.32 
40.30 
34-97 
34 87 
32.56 
30.50 
36.60 
46.68 
35-24 






$ 1. 71 


$ 0.38 




$ 0.69 
0.96 
143 
1.60 
1.65 
1. 31 
1. 19 
1. 21 
1-45 
0.96 


$ 76.09 
109.60 
253-57 
177-65 
182.92 
172.73 
I55-56 
224.68 
209.50 
176.79 


$16.92 


Georgia 

Texas 

Kansas 


5 

5 
4 
4 
4 
4 
5 
4 
4 


4 
3 
5 
4 
2 
1 
2 

8 






5 
7 
7 
6 
5 
4 
6 
5 
4 


18 
5S 
21 
92 
78 
SS 
37 
79 
61 


$17-35 
12.70 
29 -57 
20.70 
2370 
26.90 
16.00 
1. 01 


$ 3.27 
2.82 
7.04 
4.70 
5.78 
5-17 
4.00 
0.21 


15.17 

0.33 


2.86 
0.07 


47-86 
39-46 
4356 
39.25 
37.96 
43 19 
52.38 
36.83 


Wisconsin .... 

Ohio 

Pennsylvania . 

New York 

Vermont 


3.00 
2.00 
1.09 
1 .00 
2.00 


0.68 
0.49 
0. 21 
0.25 
0.42 


Total or 
average 


483 


4-6 


$150.75 


$32.69 


$14-79 


$ 3-30 


$ 2.63 


$ 0.54 


$ 5-74 


$1.24 


$173-91 


$37-77 



CONSUMPTION 117 

bought by farmers in North Carolina and Georgia is very low, being 
approximately only one-half as much as the average for all the states. 
In Texas the value of these purchases is high, owing to the fact that 
the section visited is quite dry at intervals during the summer and 
that therefore less vegetables and fruits are raised. A large percen- 
tage of the wood used for fuel in Texas is also bought. 

Of the products bought, mentioned in Table II, 86 per cent is food; 
8 per cent, coal; 1 . 5 per cent, wood; and 4 . 5 per cent, oil. The total 
value of these is $173 . 91 for a family of 4 . 6 persons. It can thus be 
seen that if an attempt were made to reduce this annual cost or 
expenditure, the first effort should be to raise more food products. 



29. CRITICISM OF PRESENT CONDITIONS ON THE FARM 1 

"In many homes life on the farm is a somewhat one-sided affair. 
Many times the spare money above living expenses is expended on 
costly machinery and farm implements to make the farmer's work 
lighter;- on more land where there is already a sufficiency; on expen- 
sive horses and cattle and new outbuildings, while little or nothing 
is done for home improvement and no provision made for the comfort 
and convenience of the women of the family." "If a silo will help to 
reduce the man's labor, a vacuum cleaner will do likewise for his wife. 
If the stock at the barn needs a good water system to help them grow, 
the stock in the house needs it too, and needs it warm for baths." 
"You see many a farm where there is a cement floor in the barn, to 
which the farmer will point with pride — the cellar in the house awful. 
A sheep dip, but no bathtub; a fine buggy and a poor baby carriage. 
On many farms a hundred dollars in cash are not spent in the home 
in a year." 

"Teach the men that we need the new improvements in our homes 
as much as they in their fields. So many of us are cooking on the 
same old stoves we first began housekeeping with; still rub our clothes 
on the washboard on wash day; use the same homemade tables, 
benches, and beds we have always had to keep house with. The men 
around us have bought automobiles, mowers, rakes, hay racks, and 
new patent stackers, sulky plows and harrows, cultivators and wagons, 
and in fact whenever they see something that will lighten their labors 

1 Excerpts from the letters received by the Department of Agriculture in 
response to letters of inquiry concerning the needs of farm women, published in 
Reports No. 104 and No. 106, Office of the Secretary. 



n8 AGRICULTURAL ECONOMICS 

they immediately write a check and lo! it is theirs. A great many of 
these things our men buy are used but a short time during each year, 
but give the women ranges, kitchen cabinets, linoleum-covered or 
hardwood floors, sanitary walls and wall covering, washing machines, 
iron bedsteads, good water, and things of use and a comfort to every 
member of the family every day in the year, and very few of the things 
are any more expensive than the price of a sulky plow. Our reasons 
for asking these things are that we believe that with better homes 
there will be less divorces from the farming districts; our boys will 
like their homes better and continue on the farm; and our daughters 
will not be so anxious to work in the city and will not say, 'Any kind 
of a man but a farmer, and anything but a farmer's wife and the same 
old things that mother puts up with.'" 

" Ignorance of value of foods is evidenced by the unhealthy and 
puny children of many farming districts. Farm women should be 
taught how to economize time and strength in performing their house- 
hold duties, how to prepare simple, nutritious meals, well cooked and 
as well 'balanced' as the 'rations' the farmer is taught to feed his 
stock." "It is like the old saying, 'A woman can throw more out of 
the window with a spoon than a man can bring in with a sack.' Only 
i per cent of the left-over food is ever used. The laboring class of 
whites (in Georgia) use two and one-half times more food-stuff than 
the negroes of the South and have one-half less to eat, for the negroes 
generally prepare their food in good shape with great saving to them- 
selves." "Some form of indigestion and the resulting physical dis- 
orders are universal. Much of their earnings goes for doctors' bills 
or patent medicines, when intelligent and correct housekeeping would 
remedy it all." 

30. POOR STANDARDS OF CONSUMPTION AS RELATED 
TO HOUSING 1 

By HARVEY B. B ASHORE 

When we first began to investigate this subject, it was hard to 
believe that real overcrowding existed in the country districts, but 
the more the subject was studied the more the fact became apparent. 
For example, a nurse from one of the state dispensaries, in her visiting 
work, came across a certain farmhouse where five people were accus- 
tomed to sleep in one not very large bedroom, which had only one 

1 Adapted from Overcrowding and Defective Housing in the Rural Districts, 
PP- 35~9 2 - (Published by John Wiley & Sons.) 



CONSUMPTION 119 

small window, and even that was nailed shut; one of these five had 
incipient tuberculosis. These people were well-to-do farmers, living 
in a large twelve-room stone house, and simply crowded into one room 
for the sake of mistaken economy — presumably to save coal and wood. 
This house is a very comfortable and airy building which would be 
entirely suitable for an even larger family to live in, under proper 
sanitary conditions. 

Another form of this overcrowding is seen in certain mountain 
districts of Pennsylvania, and I suppose it may be very much the same 
in other states. It has been noted in these places that the natives do 
not have the strong, healthy build, and a color redolent of health, but 
the thin, pale, and wan features of those suffering from the lack of 
pure air. Yet these people live in the purest of God's fresh air, in 
places akin to those in which we build our sanatoria. Why is it? 
In many instances the explanation seems to be dependent on the per- 
sonal habits of these mountaineers, who, on the advent of winter, 
"hole up," a good deal like certain animals. They lay in a supply of 
wood, but as wood is becoming scarce and they are generally lazy and 
shiftless the supply is not overabundant, so they economize space 
and heat, and have fire only in the cookstove in the kitchen. Win- 
dows and unnecessary doors are nailed shut, and here around the stove 
the family spend most of the winter, eat and sleep in one, or at the most 
two, rooms : and the result ? The faces you see here in these moun- 
tain homes remind you of the faces you see in the densely crowded 
insanitary tenements of the cities. The complete outdoor Jife of 
summer is barely able to combat the bad air and lack of air during 
the winter months, and a chronic condition of lowered vitality results. 

In one of these mountain homes — a typical one — a bedroom f 
which is the loft with a floor surface fifteen feet square, is habitually 
used by eight people. Three sleep in one bed, two in another, two 
more in still another, and the mother, who is tubercular, sleeps on 
the cot in the corner. One would hardly believe it possible that such 
overcrowding exists, yet there are many cases like this among these 
mountain people. When I remonstrated with the owner, who is well 
known to me, about his insanitary living, he admitted that conditions 
were bad and that he had hoped to build an addition to his house, but 
he was short of funds. I knew he was telling the truth, and as I was 
not anxious to help him negotiate a loan, I found it profitable to change 
the subject; loaning money to such does not overcome the defect . or if 
it did, it would certainly be temporary. 



120 AGRICULTURAL ECONOMICS 

A similar example of this overcrowding is shown in another moun- 
tain home. This small shack — one could hardly call it a house — 
contains seven people. The building is composed of four rooms — 
kitchen, sitting-room, and two bedrooms, one of which is used by four 
people and the other by three. The rooms are so diminutive and the 
windows so small that, although these people live right on the foot- 
hills of a wild mountain country, they are living under very badly 
overcrowded conditions and are paying the penalty — tuberculosis. 

The worst case of overcrowding, however, that I have ever seen 
appeared one day last summer when I prepared to administer immu- 
nizing doses of antitoxin to an Italian family during an epidemic of 
diphtheria. Thirteen children lined up to take their " medicine"; in 
addition, there were six adults, making nineteen human beings living 
in one house, and this house containing only six rooms. Where these 
people slept was almost a mystery, for there were but three beds in 
the house. They simply stretched out on the floor; and their pale 
and sallow faces told the cost — the great cost — of overcrowding. 
You might think this was a Hester Street tenement, but it happened 
to be a farmhouse, situated in one of the most beautiful valleys of 
southern Pennsylvania, far from the smoke and din of cities. The 
old idea that the country is such a healthful place to live in is good 
only so far as the country is fresh from the hand of the Lord, for man's 
make-over in the country is generally poor — very poor. 

While the home life is vastly more important than the school life, 
and though the sanitary arrangements of the surrounding farmhouses 
are usually vastly worse than the neighboring schools, yet it is quite 
likely that the country school — overcrowded and with glaring sanitary 
faults — is an item in the rural health. The little one-room school- 
house, so common all over the country, has turned out some great 
and good men, and women too, but it has also turned out many that 
might have gotten along better in the world if their physical condition 
and welfare had been looked after : it is a good thing to remember that 
real progress is not the progress of the few great men, but the standard 
and average of the plain, ordinary citizen. 

The air-space per pupil should be between 250 and 500 cubic feet, 
depending on the means of ventilation: if there is no special arrange- 
ment for the admission of fresh air, the greater air-space — 500 cubic 
feet — will surely not be too much. In an ordinary country school — 
overcrowded, of course — I have seen the air-space as small as 100 
cubic feet per pupil, which is, without question, entirely too low. 



CONSUMPTION 121 

What is the result of this overcrowding and lack of proper housing 
in the country? Just exactly the same as in the great cities — lack 
of efficiency, disease, and premature death to many. We have been 
talking much lately of our conservative policy of lumber, coal, and 
wild animals, but in many instances fail to see the great loss due to 
human inefficiency brought about by lack of suitable environment. 
While the great majority of people subjected to overcrowding and 
bad housing conditions do not prematurely die, yet they have a les- 
sened physical and mental vigor, are less able to do properly their 
daily work, and not only become a loss to themselves and their 
families, but to the state ; and forever stand on. the threshold of that 
dread disease — tuberculosis; for tuberculosis is the one great disease 
of the overcrowded. 

Just how much tuberculosis we have in the rural districts in pro- 
portion to the great cities is pretty hard to say, but everyone who has 
investigated it is positive in the opinion that there is just as much in 
the country districts; indeed, some report more in the country than 
in the adjoining cities. We find it in farmhouse and the mountain 
home — habits of carelessness possibly keep up the infection. We do 
not have "lung blocks," like the large cities, but we do have "lung 
houses" where case after case of tuberculosis has lived and perhaps 
developed. 

The Wisconsin Antituberculosis League, a year or so ago, made a 
very careful and exact sanitary survey of a certain rural district in 
that state, relative to the amount of this disease, and found that in 
some parts of this district the death-rate from tuberculosis exceeded 
that of Milwaukee, Wisconsin's largest city. 

Minnesota also discovered that it had much tuberculosis in its 
rural districts. "As serious," says Dr. Daugherty, who investigated 
the subject, "as that in the congested areas of the cities." Following 
a rural survey of several townships, under the auspices of the State 
Antituberculosis Association, there were found housing conditions 
much as I have described in the preceding pages as existed in Penn- 
sylvania. "The average number of people sleeping in one room," 
says the report, "was four." "In one house there, were eight, in 
another nine, and it was not at all uncommon to find five or six. 
This was not due to the fact that there was not enough room, for in 
many of the houses the whole family would sleep in one room, use 
one for the kitchen, and leave two, three, and in some cases four, 
rooms vacant." 



122 AGRICULTURAL ECONOMICS 

Coincident with this bad housing there was found one township 
where there were twenty-two deaths from tuberculosis in a population 
of 500 in ten years: a death-rate of 44 per 10,000. These investiga- 
tors in Minnesota also found that " contributing causes, as overwork 
and poor food, which play such an important part among the inhab- 
itants of the crowded tenement districts, do not usually count for 
much in the country. Bad housing and unrestricted exposure to 
contagion seem to be the great factors." Of course, in certain well- 
to-do farming districts, such as were under investigation in Minne- 
sota, this would hold good, but in many other places, especially in 
parts of Pennsylvania known to the author, poor food and lack of 
food are a vast contributing cause of this disease. A poor constitu- 
tion to start with and insufficient food soon engender a condition 
which quickly yields to the inroads of the bacillus. 

31. LEARNING HOW TO SPEND 1 
By JOHN M. GILLETTE 

The rural problem is not, for the nation as a whole, a problem of 
improving production chiefly, although there are sections, such as 
much of the South, where improved agriculture must take place before 
other essential things may be added unto them. Increased produc- 
tion should mean an increased profit and this in turn should mean 
higher standards of living, better education of children, and improve- 
ment in the methods of living. The very center and essence of the 
rural problem is the necessity of securing the establishment of a new 
point of view, a wider and more vital outlook on the part of the resi- 
dents of the rural regions. In the matter of living, a new outlook on 
life, its meaning — its possibilities of enjoyment and satisfaction, and 
the means which are fit to secure those ends — is intensely needed. 
Life to the average farmer is devoid of the larger and more attractive 
elements. His life is a round of eating, working, sleeping, saving, 
economizing, living meagerly, recognizing only the bare necessaries, 
skimping along with inconveniences, especially in the home, which is 
uncalled for considering his wealth. The wealthy farmer is one of 
the most helpless of men in the matter of finding satisfaction. This 
appears whenever he moves into the city to live. He still practices 
the stern economies, lives in houses without modern conveniences, 
keeps the old rag carpets, attends no theaters, goes to no lectures 

1 Adapted from The Annals, XL (March, 1912, on "Country Life"), 21-25. 



CONSUMPTION 123 

unless they are free, and acts as a man in a strange world or as one 
with a starved soul. The enjoyment side of life is lacking. His cul- 
tural and aesthetic soul is in a state of suspended animation. 

Such facts as these in the lives of the multitude of rich residents of 
rural districts make it apparent that the fundamental problem is not 
one of economics but of transforming farmers so that they look at 
life in a different manner. The appreciative qualities of life must be 
built up. They need to have developed the sentiment that the fullest 
and most successful life is the one which obtains the greatest number 
of satisfied wants in passing. Under this transformation the country 
will build good houses, comfortable in the modern sense, having the 
conveniences which lighten the lives of the indoor workers, and the 
equipment which renders the place sanitary and healthful. It will 
put in machinery everywhere possible to do the hard work, to reduce 
chores, as well as make production more profitable. It will beautify 
the grounds, improve the roads for travel purposes, and look to 
nature as a source of inspiration. 

A very large part of the emphasis in the discussions of farm life 
has been laid on the necessity of improving it in order to keep the 
boys and girls from drifting to the cities. The assumption has been 
that the country needs them and that city attractions established in 
the country would be effective in holding them there. However 
effective this procedure might prove to accomplish what is urged (and 
its effectiveness may well be doubted), it does not appear to be the 
highest motive which may be furnished. A more just view regards 
the improvement of farm life as a procedure which of right belongs 
to that great multitude of good people who will always be rural resi- 
dents. They have a humanity in common with the residents of cities. 
They have needs of life and work which they ought to realize if they 
can only obtain a vision of their possibility and worth. They are the 
heirs of the products which the myriads of the makers of civilization 
have created and conserved and should of right come into the enjoy- 
ment of them. Country populations have a right in their own stead 
to enjoy all that life offers, even if they do not contemplate leaving 
the soil for the city. The great problem is to discover a way by which 
their outlook on life and society may be transformed into one which 
appreciates the worth of realizing the greatest satisfactions and pos- 
sibilities which may come to them as rural citizens of the great 
republic. 



124 AGRICULTURAL ECONOMICS 

32. AN EFFICIENT STANDARD OF RURAL LIFE 1 
By T. N. CARVER 

In many .parts of the country a distinct tendency is noticeable for 
the old population to give way for a new population of an entirely 
different type. In parts of New England the new population is 
French-Canadian, Italian, Portuguese, Polish, and, in a few places, 
Swedish. In some parts of the country a second phase of this process 
is showing itself. Foreigners of an earlier migration are being dis- 
placed by foreigners of a later migration. The incoming population 
seems always to be a population with a lower standard of living than 
that which is displaced. 

This is an important economic fact to be considered. Is it true, 
and must it always remain true, that the men with the lower standard 
of living shall drive out the men of the higher standard ? A restriction 
of immigration, coupled with a minimum-wage law, would accomplish 
something, but it is difficult to see how it would stop the farmers with 
a lower standard from buying or renting the land away from farmers 
with a higher standard. Of two farmers who are able to grow equally 
good crops the one with the cheapest standard of living can accumu- 
late capital most rapidly. He, therefore, can outbid the other in 
competition for land, whether they are in the market as buyers or as 
renters. The minimum-wage law could not affect this process at all, 
and the restriction of immigration would only retard it. Immigration 
from heaven is quite as much a factor as immigration from the Eastern 
Hemisphere, and immigration from heaven is favored by a low stand- 
ard of living. The battle of the standards is inevitable, and the vic- 
tory will go ultimately to the most efficient. In other words, in the 
final result a standard of living is protected by its own efficiency, and 
by that alone. 

This suggests the important distinction between a high standard 
and an efficient standard. A high standard of living ordinarily means 
merely an expensive standard. If every additional expense added 
to one's standard of living adds correspondingly to his productive 
efficiency, then a high standard is also an efficient standard; but if it 
does not in some way increase his efficiency, then it is merely an 
expensive standard, and will handicap its possessor in the struggle for 
existence, whether that struggle is waged by the destructive methods 
of warfare or the productive methods of economic competition. The 

1 Adapted from The Annals, XL (March, 19 12, on "Country Life"), 21-25. 



CONSUMPTION 125 

problem of the permanent maintenance of a high standard of living is, 
in final analysis, the problem of rationalizing the high standard and 
making it efficient. Otherwise it will sooner or later be driven out by 
a lower standard. This is also the problem of civilization, for, unless 
this problem of rationalizing the high standard of living can be worked 
out, so that it can hold its own against low standards, then, as soon 
as we have exhausted the native resources of our continent and Euro- 
pean races have lost their market for their manufactures, our civili- 
zation must sink back to the condition of all old civilizations, where 
the mass of the people live on the minimum of subsistence. When, 
therefore, we begin to take the long look ahead, we shall find that the 
problem of the consumption of wealth is the most fundamental of 
all economic problems. 

How then can an American standard of living defend itself against 
displacement by a cheaper standard ? The only answer is : by becom- 
ing a rational and efficient standard instead of merely an expensive 
standard. That is to say, if the increased expenditure of the American 
farmer's family can be made to yield returns in greater efficiency, 
greater intelligence, greater mental alertness, more exact scientific 
knowledge and calculation, then the American farmer will not be 
displaced by the foreigner. But if the rising cost of living for the 
American farm family is due to a mere demand for luxury, for expen- 
sive vices, and for ostentation, then there is no power on earth which 
will protect his standard of living. Such a farmer is handicapped in 
competition with the more simple-minded foreigner, and the latter 
will offer such prices for land as the former will not be able to pay. 
Being unable to maintain a family on such a standard, this type of 
American farmer will sacrifice his desire for a family, will have few 
children or none at all, and in a few generations will disappear alto- 
gether. The change in the characteristics of our rural population is, 
from the point of view just discussed, merely a phase of the universal 
struggle among standards of living, and, here as elsewhere, efficiency 
wins. Whether we like it or not, this struggle is going to continue, 
and the victory is going to fall on the side of efficiency. The sooner 
we accept this fact, and make up our minds to adjust ourselves to it, 
the better it will be for us. 



Ill 

LAND AND OTHER NATURAL AGENTS OF 
AGRICULTURAL PRODUCTION 

Introduction 

To estimate the area of our five continents and our many islands, 
or to survey the surface of the United States, is to get but little infor- 
mation about the land as a factor in the production of agricultural 
goods. Fifty- seven million square miles — this is little if anything more 
than a mathematical declaration, the skeleton of an idea, which needs 
be filled in by much critical analysis of quality. Obviously some of 
this land yields no product, some yields a little (repaying the harvester 
but not justifying tillage), other portions respond moderately to man's 
labor, and a little gives bounteous return to husbandry. 

There are absolute frontiers of cold and drought and flood; 
there are relative limitations of yield, due to too much as well as too 
little heat, to either scarcity or overabundance of moisture. Nor is 
the productiveness of land a consistent quality. Being subject to the 
fickle changes of the weather, the product of a whole season may be 
decimated by an unseasonable frost or a single devastating storm of 
hail or wind, or greatly increased by an opportune rain or a fortnight 
of favoring sunshine. 

Not only does fertility (whether due to chemical, physical, or 
biological conditions) vary from region to region and even from acre 
to acre, but "the original and indestructible powers of the soil" 
fluctuate up and down with great rapidity, in response to good or 
bad methods of farming. 

Finally, there is a frontier of rough or steep land, which stops the 
farmer's progress not less than does the cold frontier or the dry fron- 
tier. Just how far short of the perpendicular this limit shall fall we 
are hardly prepared to say, but it is known that in extreme cases 
agriculture may succeed in conquering slopes of as much as forty-five 
degrees, and sheep and goats can glean some products from even 
steeper hillsides. It is evident that the practical penalty which land 
suffers as a result of roughness of topography appears in the form of 
soil erosion, difficulty of tillage, and poor transportation facilities. 

126 



LAND AND OTHER AGENTS OF PRODUCTION 127 

Here, again, the question is one of degree, and we pass from lands that 
are absolute waste to grazing lands, orchards, and better and better 
types of field tillage, with larger fields, lighter draft on farm imple- 
ments, better roads, and cheaper freight rates. 

It is apparent that we are dealing in all this with two sets of con- 
ditions — one absolute, the other relative. Degrees of temperature, 
inches of rainfall, and angle of slope — these are absolute facts. But 
the actual technical productivity of land possessing a given measure 
of these positive attributes is a relative matter and depends upon our 
technique of production. The effective qualities of land are those 
which men have learned to understand and in some measure to control. 
The character of land as a technical agent of production thus under- 
goes a change with every addition to the science of agriculture, with 
every new discovery concerning soil fertility or plant or animal 
behavior. 

This may seem at first glance to make the category of "land and 
other natural resources" very inclusive and to threaten to bring into 
it some of the human factor that we are in the habit of classing under 
the head of labor. As a matter of fact, however, it serves rather to 
complete the discussion of the contribution which nature makes to 
the productive process. Our knowledge has been greatly enlarged in 
this direction since the day when Ricardo spoke so unluckily of original 
and indestructible powers. But this expanding knowledge has never 
been very fully taken into account by our economic theory, perhaps 
because general economics has been so largely concerned with indus- 
trial problems and thinking so often in terms of the standing-room 
or location aspect of land. In agricultural economics, the stress is 
of necessity upon this very question of the productive contribution 
of land and its appurtenances, of life forms and natural forces. We 
are therefore forced to explore somewhat, or rather to take due 
account of the explorations of the scientists, and to build our economic 
theory accordingly. They aspire to tell us not only the forms in which 
nature presents herself but also the forces which she offers to mankind 
to use to reshape these forms to his advantage. The potentialities of 
plant breeding or nitrogen fixation must go into our inventory of the 
land and its resources quite as much as the area of the land or its 
present state of fertility. 

But such qualities are quite distinct from the labor of the men 
who utilize them or the objects in which they are embodied. We 
may illustrate this by reference to the principles of heredity and the 



128 AGRICULTURAL ECONOMICS 

practice of scientific breeding. Mendel's law (or, rather, the fact of 
hereditary transmission of characters, on which it is based) is evi- 
dently some part of the natural resources with which we may work 
toward the end of agricultural production, and by which we must be 
limited in that endeavor. But the personal ability with which this 
or other principles of inheritance are applied to the art of cattle- 
raising depends upon human factors and is to be classed as an attribute 
of labor. And the product of these clever or clumsy attempts to use 
nature's resources makes a third and separate factor of production, 
capital-goods. Such goods have productive qualities of their own, 
and for the duration of their existence, crystallize some fragment of 
the potentialities of nature and man into the concrete powers and 
limitations of a particular tool for further production. 

Finally, we face the question of conservation. This, we must 
remember, is a matter of economic judgment, but upon a basis of 
scientific fact. The more we know about the land as a productive 
agent, the more sound should be our judgment as to what can best 
be done to preserve and increase its productivity. 

In analyzing the problem we need clearly to distinguish between 
productive use of the land, which use has in it an inevitable element of 
impairment; waste of natural resources which is incidental to this 
productive use but which adds nothing to the product; and waste of 
the land through waste of its products in connection with the pro- 
cesses of consumption. A rational conservation movement begins 
by discovering where and how productive resources are being de- 
stroyed, and by measuring the amount of such impairment. Second, 
it examines where this wealth has gone and to what use it has been 
put. Third, it enquires how much of these materials might be returned 
to the land or need never have been taken from it. Finally, the ulti- 
mate economic problem is how much it would cost thus to conserve 
the given amount of natural wealth. Some enthusiastic conserva- 
tionists have urged us to save one dollar's worth at two dollars' cost. 

Certainly there is no complete and final formula to be applied in 
answering the conservation riddle. Our policies must be those of 
expediency with reference to the concrete circumstances of time and 
place. Not only do the economic circumstances of costs and prices 
undergo a constant process of change, but the technical situation with 
reference to which they must be considered is bound to alter in the 
future as it has in the past. The preparation we make for coming 
years will depend upon what kind of a future we expect it to be. If 



LAND AND OTHER AGENTS OF PRODUCTION 



129 



we have faith that we shall discover new resources and attain to a 
better control of natural forces, we are certain to discount the dangers 
that less optimistic men foresee. Only when that future has arrived 
will it become clear whether we have ordered our activities by a 
rational faith or have been reckless and unsuccessful gamblers. 



A. Area the Fundamental Fact 

33. SOME FIGURES CONCERNING LAND AREA 

The latest estimates of the land area of the earth, show a total of 
nearly fifty-eight million square miles, as follows: 

Asia 17,470,282 square miles 

Africa 11,632,000 

South America 7,344,508 

North America 7,146,641 

Europe 3,671,624 

Australasia 3,456,290 

Polar regions 6,970,000 

Total 57,691,345 



Only about half of this area is to be thought of as even potential 
agricultural land, as is seen from the following rough classification: 

Steppes 14,000,000 square miles 

Polar regions 6,970,000 

Desert 4,861,000 

Fertile area 29,000,000 

For the United States, the figures are as follows. 1 







Per Cent of 




Per Cent of 




Acres (1910) 


Total Land 
Area 


Acres (1900) 


Total Land 
Area 


Land area of the country . . 


1,903,289,600 


IOO. 


1,903,461,760 


100.0 


Land in farms 


878,798,325 


46.2 


838,591,774 


44.1 


Improved land in farms . 


478,451,750 


25.I 


414,498,487 


21. S 


Unimproved land in 










farms 


400,346,575 


21 .O 


424,093,287 


22.3 



1 Figures given in the Thirteenth Census. The decrease in total land area 
in 19 10 is due chiefly to the building of the large irrigation reservoirs in the West 
and to the formation of the Sal ton Sea in California. 



130 AGRICULTURAL ECONOMICS 

B. The Relation of Climate to the Productivity of Land 

34. AGRICULTURE'S "FARTHEST NORTH" 1 
By W. P. RUTTER 

It has been denied that wheat can be raised in Canada north of 
55 degrees north latitude, but this notion has had to be abandoned, 
for wheat is gradually creeping nearer and nearer to the Arctic Circle. 
At Sitka, Alaska, 56 degrees north latitude, spring wheat matured 
in 1900 and 1901. In the Peace River Valley wheat has been success- 
fully grown for some years past, and at Fort Vermilion, north latitude 
58.4 degrees, there is a roller mill whose capacity is thirty-five barrels 
per day, and the wheat ground in this mill is all grown in the vicinity. 
Wheat has been harvested at Fort Simpson, in north latitude 61.8 
degrees, and at Dawson City, 64 degrees north latitude, wheat has 
matured in favorable seasons. In the more northerly tracts, however, 
present factors show that the chances of failure are too many for 
wheat cultivation to be a commercial success. 

A fact of peculiar interest is that the summer season in the basin 
of the Mackenzie River is nearly as warm as in Alberta. At Edmon- 
ton and Calgary the mean summer temperature is 59 F., at Dunvegan, 
58 F., at Fort Chippewyan, 59 F., and at Fort Simpson, 57 F. The 
explanation lies chiefly in the fact that the insolation, or heat received 
from the sun, scarcely varies about midsummer between the parallels 
of latitude 40 and 60 degrees; the larger number of hours the sun is 
above the horizon in the higher latitudes very nearly balancing the 
effect of less direct solar radiation. Southern Alberta has a much 
milder winter than the rest of Northwest Canada. The cold becomes 
greater to the eastward, and northward the change is even more 
rapid, and in strong contrast to the small variation during the sum- 
mer: Calgary, 17 ?i F.; Edmonton, 13 F.; Dunvegan, i° F.; Fort 
Chippewyan, — 5 F. ; and Fort Simpson, — 13 F. But it is the spring 
and summer which are the important seasons to the wheat-growers of 
Northwest Canada. 

Throughout the region the spring is short and the farmer must 
utilize fully every day from the last days of March to the last days 
of April. In Eastern Canada, where the snowfall is heavy and often 
packed by thaws, the farmer waits until the snows melt and the frost 
is out of the ground before commencing spring seeding. Not so in 

1 Adapted from Wheat Growing in Canada, the United States, and the Argentine 
(Adam and Charles Black, London), pp. 4-5, 44-46, 54, 59. 



LAND AND OTHER AGENTS OF PRODUCTION 131 

Northwest Canada, for the snow goes soon, being light and never 
packed. As soon as six inches of the soil are thawed the grain is sown ; 
nor does the farmer trouble about the frost coming out of the ground. 
As the frost relaxes under the warm sun, the moisture resulting feeds 
the young roots, and they are provided with an excellent foraging 
ground. By the end of April all wheat should be sown in order that 
the warm, moist days of the early summer may contribute to the ger- 
mination of the seeds. During May and June the temperature 
rapidly rises, and from the middle of May until the end of July the 
heaviest rainfall occurs. During July and August bright hot days 
are frequent, and temperatures exceeding 90 F. have been recorded. 
A point of great importance in Canada's climate is the percentage 
of sunshine; nearly all parts of the Dominion have an annual per- 
centage of over 40, and a summer percentage of between 53 and 59. 
This aids in the perfect development of high-grade wheats. 

35. THE DISADVANTAGE OF TOO MUCH HEAT 

While it is true that the possibilities for agricultural production 
diminish as we approach the arctic zone, the opposite statement, 
namely, that the farther from the pole we go the better are the con- 
ditions of agriculture, would not be strictly true. As we move away 
from the subarctic environment we enter regions of longer growing 
season and more intense heat, regions which have no extreme winter 
temperatures to preclude the growing of the deciduous fruits, and 
regions in which farm animals can be cheaply housed and cheaply fed 
during the winter season. But as we go farther toward the equator 
we find that this is not an unending cumulation of blessings, but, to 
no small degree, means merely the substitution of one set of agricul- 
tural products for another and of a fleeing from ills we perchance know 
to others that we wot not of. As we enter the land hot enough for 
cotton and sugar-cane and citrous fruits, we find that we must drop 
buckwheat, apples, many of our vegetables, and other equally valuable 
items from our planting list. As we leave the land where frost some- 
times nips the buds in spring or the immature crops in autumn, we 
enter the land where frost fails to help the husbandman to hold weeds 
in check and where "the worm dieth not" but the boll-weevil and the 
fever tick and the tetanus germ ravage crops and stock for twelve 
months of the year. 

Likewise, the absence of frost increases the losses due to soil 
erosion and the leaching out of plant food; greater heat increases the 



132 AGRICULTURAL ECONOMICS 

rate of evaporation and thus enlarges the demand for rainfall to 
satisfy the farmer's crops. Finally, "heat rigor" is as real a draw- 
back as the checking of growth by cold. That is, there is a maximum 
temperature which any given species of plants can tolerate, and this 
marks the upper limit of its possibilities of growth. Even before this 
point is reached, growth may be distinctly retarded — a condition 
familiar to all through its manifestation upon plant life in the hottest 
period of summer weather. 1 

The handicap of the tropics is well portrayed by Professor Ells- 
worth Huntington in a recent article on Guatemala. 2 He says: 

We are apt to think of tropical lands as places where vegetation is 
exuberant and where a living is obtainable with extreme ease. As a matter 
of fact, in vast portions of the torrid zone it is harder to get a living than 
in the temperate zone. In the true tropical forest, agriculture is practically 
out of the question. Even for the white man it is difficult to clear the 
ground, and for the sluggish son of the tropics it is almost impossible. 
In the tropical rain forest bushes will grow to a height of ten to twenty 
feet in a single year. Indeed, in the short space of two months so much 
herbage will spring up that a piece of forest which has been cut cannot be 
burned, even though the trees have become dry. 

This is not theory, but actual fact. In the spring of 19 13, in a part of 
Guatemala where the forest is by no means of the densest kind, and where 
a considerable number of coffee plantations exist, I saw this happen. The 
trees had been cut, but so many showers fell during the nominal dry season 
that the branches did not become dry enough to burn, and consequently 
many people were unable to plant crops. One might ask why they could 
not plant old fields cleared in previous years. The answer is simple. In 
this particular region the staple product is Indian corn. The first year 
after new land has been burned it gives a splendid crop; but if the same 
tract be planted a second time, the crop is so poor as not to be worth 
raising. Just why this is so is not certain; perhaps because the abundant 
rains leach out certain elements of the soil very rapidly; perhaps because 
the warm, humid conditions of the ground develop toxic substances inimical 
to cultivated plants; or perhaps because the heat of the sun causes the soil 
to decompose with great rapidity, and hence quickly to lose its strength. 
At any rate, the fact remains that it seems to be impossible to cultivate the 
same tract more than one year at a time. The ordinary practice is to 
clear and burn an area, plant it a single year, then leave it to grow up to 
bushes for from three to five or ten years, and then, when the soil has 

1 See E. Davenport, Principles of Breeding, pp. 255-57. (Ginn & Co.) 

2 Yale Review, April, 1914, p. 506. 



LAND AND OTHER AGENTS OF PRODUCTION 133 

recovered, to go once more through the whole process of cutting, burning, 
and planting. 

Evidently, then, vast areas within the tropics are beyond the pale of 
agriculture, or else can be cultivated only in a most haphazard way. The 
kind of intermittent agriculture which alone is possible in many jungle- 
covered parts of tropical lands is most demoralizing. Inasmuch as the 
people must change their fields every year and may in some years be unable 
to burn the brush which they have cut, they have no feeling of permanence. 
In many cases there is no definite ownership of land, and even where this 
exists the owner has nothing to encourage him to improve his holdings. 
It is useless or, in fact, sheer waste of time to attempt to improve a tract 
which next year is to be abandoned once more to the jungle. 



36. LOCAL AND SEASONAL PECULIARITIES OF CLIMATE 

a) FROSTS 1 
By HARRY J. WILDER 

The controlling factor in grape production is not one of mean 
seasonal temperature, but rather of seasonable and unseasonable 
frosts. To illustrate (in the region of northeastern Pennsylvania, 
adjacent to Lake Erie), an equalized temperature curve extends from 
the lake shore belt southward to include almost all of Crawford and 
Mercer counties, but the length of the frost-free season is much 
greater along the lake shore than well up on the escarpment. The 
tempering influence of the lake on the climate of the adjoining plain 
is well known. A further fact has been demonstrated in that a part 
of this modifying influence extends for at least a little way up the 
escarpment slope to the south, thus making possible an extension of 
the vineyard interests. But it is only for a short distance south of 
the escarpment that the frosts are held off long enough in the early 
autumn to make grape growing safe. 

In the southern district, too, the advisability of setting tree fruit, 
particularly apples, depends in some measure upon the relative 
immunity from late spring frosts, while the corn crop and vegetables 
as well are similarly affected. These climatic problems are primarily 
local rather than regional in scope, as is illustrated by the frequent 
loss, in hollows or depressions, of fruit and other crops by late spring 
frosts. 

1 Adapted from 10th Report of the Field Operations of the Bureau of Soils, 
pp. 220-23 and 1169-73. 



134 



AGRICULTURAL ECONOMICS 



In the accompanying table are given weather records to illustrate 
the condition at different stations in the area: 



DATES OF FIRST AND LAST KILLING FROSTS 





Erie 


Saegerstown 


Wellsboro, 1,327 Feet 
Above Tide 


Year 














Last in Spring 


First in Fall 


Last in Spring 


First in Fall 


Last in Spring 


First in Fall 


1901. . . 


. . April 10 


Nov. 19 


May 15 


Oct. 4 


May 16 


Oct. 4 


1902. . . 


. . April 8 


Nov. 8 


May 29 


Oct. 8 


May 29 


Sept. 6 


1903... 


. . April 5 


Nov. 11 


April 28 


Sept. 29 


April 6 


Sept. 29 


1904. . . 


. . April 21 


Sept. 22 


May 12 


Sept. 22 


May 12 


Sept. 22 


I905- •• 


. . April 22 


Oct. 26 


May 24 


Oct. 26 


May 21 


Sept. 27 


1906. . . 


. . April 8 


Nov. 1 


May 10 


Oct. 1 


May 21 


Oct. 12 


1907... 


. . April 20 


Oct. 19 


May 22 


Oct. 9 


May 30 


Oct. 6 


1908. . . 


. . April 17 


Nov. 13 


May 5 


Sept. 30 


May 10 


Sept. 16 


Average 


. . April 14 


Oct. 30 


May 14 


Oct. 5 


May 14 


Sept. 26 



It will be noticed that the shore belt represented by the Erie 
records has a much longer season free from frosts than any of the 
other stations. 

b) A MARGINAL CLIMATE 1 
By MACY H. LAPHAM 

The most striking and characteristic climatic features of the area 
with which this report deals (western North Dakota) and which is 
embraced within the climatic province of the semiarid Great Plains 
are a restricted and variable annual precipitation, long, severe winters, 
and a relatively brisk wind movement. The average annual precipi- 
tation is rather limited for the successful production of crops under 
ordinary methods of farming. The distribution of rainfall is, more- 
over, somewhat fickle, varying greatly from year to year. The 
greater proportion of the precipitation occurs during the summer 
months as heavy local showers, often accompanied by thunder and 
lightning. For Williston, the Weather Bureau records exhibit an 
extreme variation in the total precipitation between the wettest and 
the driest observed years of 15.9 inches (7.4 inches to 23.3 inches). 

While the area under discussion lies in the path of most of the 
storms sweeping across the country from the Pacific Coast, the air 
currents have been robbed of their moisture in crossing the slopes 
and crests of the elevated mountain chains to the westward. The 
greater portion of the rain falls during the growing season, however, 

1 Adapted from 10th Report of the Field Operations of the Bureau of Soils, 
pp. 1169-73. 



LAND AND OTHER AGENTS OF PRODUCTION 135 

thus favoring the growth and maturity of the crops. The years of 
greatest rainfall are not always the most favorable years for the pro- 
duction of crops, the harvesting of a successful crop seeming to depend 
more upon the absence of hot, drying winds and upon the timeliness 
of the rainfall rather than upon the total amount precipitated. The 
snowfall varies from but a few inches to several feet. It is, however, 
generally of a dry character and is readily removed from the exposed 
prairie surface and slopes by winds, so that while collecting as deep 
drifts in coulees, railroad cuts, or in other depressions, the grazing of 
stock upon the exposed hillsides and slopes in the broken lands is 
usually not greatly interfered with. 

Hailstorms are of relatively frequent occurrence and are often 
very destructive, and the insurance of crops against damage by hail 
is a common practice. Hailstorms are, however, of local character, 
and while the destruction wrought to crops is often complete, it is 
confined to relatively narrow strips or to small spots, and but a small 
proportion of the country is affected during any single season. 

The winter season is long and generally marked by long periods 
of severe temperature, ranging well below zero, and occasionally 
reaching — 30 to — 40 F. Killing frosts may occur early in Septem- 
ber, the average date of the first killing frost falling about the middle 
of this month. The last killing frost is generally looked for about the 
middle to the latter part of May, but light frosts may occur in almost 
any month of the year. During the summer the days sometimes 
become extremely warm, 90 to ioo° F. or even higher temperatures 
being occasionally reached; 1 14 has been recorded at Medora. Nights 
are usually cool, a variation of from 50 to 6o° between the extreme 
temperatures of the day and night being sometimes experienced. 

The wind movement is generally brisk and days of relatively high 
winds are not of infrequent occurrence, particularly during the winter 
and spring months. Gales of considerable severity often accompany 
the local thunderstorms of the summer months. Damage is some- 
times caused by the lodging of grains or the insecuring of farm build- 
ings occupying exposed places. During the summer months there 
are brief periods of hot, dry winds, causing excessive evaporation and, 
when these occur during periods of drought, sometimes injuring the 
growing crops. 

The popular belief that a permanent climatic change has taken 
place and that there will be no further repetition of successive 
seasons of unusual drought is unfounded. 



136 AGRICULTURAL ECONOMICS 

c) WINDS 1 
By L. E. HAZEN 

The long-continued droughts in the semiarid belts are no more 
of a proposition than the excessive winds. As a rule, such crops as 
wheat, barley, rye, sorghum, cowpeas, and Kafir corn will withstand 
a drought of six weeks to two months fairly well if there is no wind. 
Alfalfa will grow on 11 per cent of water in the first 3 feet, retaining 
a rich green color; two hours of 40-mile wind will stop all growth and 
cause a yellow tinge to appear on the leaves with 18 to 20 per cent of 
water in the soil and an air temperature of not over 8o° F. 

The high evaporation of moisture from the soil in the western 
country is due largely to the high velocity of the wind. The cultiva- 
tion necessary to store moisture and produce the perfect tilth required 
for the best growth of the crop favors the blowing of soils. There has 
been much written to explain how to establish a soil mulch, but so far 
there is little information as to how to keep it. A soil mulch will 
check evaporation, but the first stiff wind will blow the mulch away. 
The clean-cultivated land at the Hays, Kansas, Experiment Station 
blows very badly each spring, as the records show; land which is 
lightly tilled does not suffer much. 

The following notes are taken from the records of the Station: 

March 1, 1905. — During the three day's high winds this whole field 
blowed badly and considerable wheat is covered because of the flying dirt par- 
ticles having lodged behind sorghum stalks and in low places. Wheat plants 
appear rather sickly, though the part in the ground is alive and thrifty. 

April 24, 1906. — The high wind of today did much damage to all spring 
crops that were above ground, and the barley and spring wheat east of the 
road were affected most, because of the constant drifting of particles from 
the wheat fields on the west side of the road. 

From another field, kept in clean cultivation throughout the 
season, the dust blew in clouds and drifted so thickly in the adjoining 
field as to kill weeds and grass in places. The influence of wind-breaks 
on the velocity of the wind is but local. We must depend upon some 
other method of preventing the loss of soil than by foresting this great 
area of land which we seek to put under the plow. 

1 Adapted from "Dry-Land Agriculture," Bulletin 130, Bureau of Plant In- 
dustry, United States Department of Agriculture, pp. 51-53. The last two sen- 
tences and the first two in the second paragraph are borrowed from a paper by 
E. A. Burnett, pp, 10-11, of the same bulletin. 



LAND AND OTHER AGENTS OF PRODUCTION 



137 




138 AGRICULTURAL ECONOMICS 

38. THE POSSIBILITIES OF IRRIGATION FARMING 1 
By CARL S. SCOFIELD 

According to the returns of the Thirteenth Census, there are in 
the continental United States about 14,000,000 acres of irrigated land, 
or about 80 per cent more than existed ten years ago. Public interest 
in irrigation development found expression in 1902 in the enactment 
by Congress of the national reclamation law, under which irrigation 
water has been provided for about 1,000,000 acres of land. Under 
private enterprise, with some aid from state and national legislation, 
a much larger acreage has been put under irrigation. 

As a people we are optimistic regarding irrigation farming, but it 
has only recently become an appreciable factor in American agricul- 
ture, and it is not yet a factor of great importance if considered only 
from the standpoint of the area involved. Accepting the estimate of 
14,000,000 acres, the total irrigated land is but little more than one- 
third the size of the state of Iowa. To make this comparison, how- 
ever, does an injustice to the real economic significance of the 
movement. It is not the sole purpose of irrigation to produce foodstuffs 
for our eastern and European markets. It serves also to provide 
homes on the land in a salubrious climate and to support the people 
engaged in stock raising and in developing the mineral wealth of the 
western states. But as the area of irrigated land has increased and as 
the total production has exceeded local demands, the surplus has had 
to see outside markets, there coming into competition with the prod- 
ucts of unirrigated land. This competition seems certain to bring 
about some readjustments in the methods of irrigation farming. 

It costs more to produce a crop under irrigation than under rain- 
fall. Consequently, unless the yields are larger, or the prices higher, 
the margin of profit to the producer must be less with irrigation than 
without. It is a popular assumption that crop yields are much larger 
under irrigation than under rainfall, but it is doubtful if the data 
available warrant this assumption in so far as it applies to most of 
the staple farm crops. There can be no doubt that in many irrigated 
sections of the Western United States the soils are so fertile and the 
climate so favorable that when irrigation water is applied bountiful 
crops may be secured. But profitable agriculture does not depend 
solely upon the successful growth of the crop. The costs of produc- 

1 Adapted from "The Present Outlook for Irrigation Farming," Yearbook of 
the Department of Agriculture, 1911, pp. 371-82. 



LAND AND OTHER AGENTS OF PRODUCTION 139 

tion and the relatively higher charges for transportation and distri- 
bution are very important factors. And, further, the prosperity of 
some of the irrigated sections of the West has been more largely due 
to increases in land values than to the profits of crop production. 

The fixed charges of irrigation farming. — Not infrequently the 
overinflation of land values may become the most serious economic 
problem of an irrigated region. Land that represents an investment 
of $25 an acre, with a fixed interest charge of $2 an acre per annum, 
might yield a fair return in some low-priced staple crop, while the 
same land at $200 an acre, with a fixed interest charge of $16 an acre 
per annum, must be devoted to a high-priced crop unless it is to be 
farmed at a loss. Too often a new settler in a region overlooks this 
significant point. 

The fixed charges for interest and depreciation on equipment, 
though often overlooked by the farmer, are very real items of expense. 
They are frequently less in an irrigated section than elsewhere, particu- 
larly where the climate is mild and inexpensive buildings will serve 
for sheltering stock and machinery. The charge for irrigation water 
is a factor peculiar to irrigated land, but is one not usually over- 
looked by the prospective colonist nor long forgotten by the actual 
settler. 

The labor cost of crop production. — There is very little satisfac- 
tory information as to the cost of crop production in different sections 
of the country, and none that permits direct comparison between 
farming with irrigation and without. Such items as planting and 
tillage should be much the same in both cases, but the preparation 
of the land, which includes leveling for irrigation, is often an important 
item of expense. The cost of harvesting crops may be in some 
instances less under irrigation, because of the lessened need for hurry 
to avoid rain or storm injury. 

The cost of marketing crop products. — Many of our irrigated sec- 
tions are isolated and far from market centers. In all cases where 
the production of a crop exceeds the demand for local consumption 
the local price at once falls to correspond to the distant market price, 
less the freight and commission charges. When an irrigated region 
is first settled the local prices of staple crop products, such as grain 
and hay, are often very high. The local demand for these products 
is due to the needs of incoming settlers, who must buy feed for their 
work stock until their own farms come into production, or to the needs 
of those engaged in the construction of the irrigation system, or for 



140 AGRICULTURAL ECONOMICS 

feeding stock on adjacent range land or isolated mining camps. Dur- 
ing the first years in such a section the local prices are based on cost 
of products in some older producing section plus the freight. As soon 
as the local production exceeds the local demand, a complete reversal 
takes place and prices drop to a point which is determined by the 
outside market prices less the freight. It is in this period of read- 
justment to the new market conditions that the real and discouraging 
hardships of the new settler are felt — the time when water payments 
lapse and the less persevering give up the struggle. This period of 
depression is a feature of the development of nearly every new irri- 
gated section. 

The need of special crops or industries. — Relief comes in finding 
other crops that serve local purposes or that are of higher value, so 
that they can bear the cost of transportation to outside markets and 
yet leave the producer a profit for his labor. It is fortunately true 
that many of our irrigated regions enjoy such favorable climatic con- 
ditions as to permit the production of crops that thrive poorly or not 
at all under rainfall agriculture. Such crops as dates, figs, olives, 
English walnuts, and Egyptian cotton are pre-eminently suited to the 
irrigated sections of the Southwest. Certain truck crops, such as 
cantaloupes, asparagus, and Burmuda onions, may be put on the 
market from our southern or southwestern irrigated lands at a season 
when prices will cover the high cost of production and transportation. 

Many irrigated sections are situated in the midst of range lands 
devoted to raising cattle, sheep, and horses. Irrigated agriculture 
may supplement the grazing industry in a very profitable way. Live 
stock may be produced cheaply on the range, but the cattle and sheep 
need to finish their growth on grain and hay in order to bring good 
prices in eastern markets. Also, the most economical use of the range 
requires that the stock must be given some forage in addition to the 
range during part of the year, whether sent to market or not. Most 
irrigated land is well suited to alfalfa, which is one of the best meat- 
producing forage crops. Likewise such dairy products as butter and 
cheese find a ready market at any time and are so concentrated that 
transportation charges are relatively small. Orchard fruits and truck 
crops are much exploited as a means of large profits in favored sec- 
tions. But many of the highly favored regions are small and defi- 
nitely circumscribed. Keener competition from eastern lands in the 
production of such fruits as apples, pears, and peaches for eastern 
markets is certain to come in the near future. 



LAND AND OTHER AGENTS OF PRODUCTION 141 

The prospects of sustained productivity. — The use of irrigation 
water as an aid in crop production is as old as history, but the history 
of irrigation is, with some exceptions, a story of rise and decline. 

Our modern irrigation development in this country is still too new 
to give very definite indications as to what may be expected in the 
future. Some disturbing symptoms have appeared in recent years 
on our older irrigated lands, but as a people we are going deeper into 
agricultural science than our predecessors, and it remains to be deter- 
mined whether or not we can meet and overcome the difficulties that 
have caused failures in the past. Most people have only a casual 
interest in the welfare of posterity. But there are certain phases of 
this matter that are of acute interest to the irrigation farmer. What 
is known as the rise of alkali is a matter that may become serious in 
months as well as in centuries, and is a problem that is likely to 
become acute on nearly every tract of irrigated land. 

The so-called rise of alkali may be defined as the accumulation in 
the soil of soluble salts which are the products of soil weathering and 
disintegration. Whenever this accumulation becomes excessive these 
salts hinder or prevent the growth of crop plants. These salts seldom 
accumulate in harmful quantities where the rainfall is adequate, 
because they are usually leached out of the soil as fast as they become 
soluble. If it were possible to apply irrigation water in such a manner 
and in such quantities as to provide the crop plants with what they 
need and in addition to insure some percolation of water through the 
soil into the underground drainage, it seems probable that one of the 
most acute difficulties of irrigation would be overcome. But this is 
not easy to accomplish. In the great majority of cases the land is 
irrigated too little or too much. When irrigated too little the salts 
remain and accumulate in the soil, and when irrigated too much they 
are transported from one place only to come to the surface in another 
where the ground- water collects. Thus the use of irrigation water 
under the ordinary conditions of farming results in serious disturb- 
ances in the normal equilibrium between the soluble and the insoluble 
constituents of the soil. And these disturbances are soon manifested 
by consequent derangement in the nutrition of the crop plants. 
Methods of control involve, among other things, the maintenance of 
a supply of organic matter in the soil and at least the occasional per- 
colation of water through it. 

Aside from cases where alkali or seepage water is the obvious 
cause of a decline in the productivity of irrigated land, there are other 



142 



AGRICULTURAL ECONOMICS 



causes of decline that are not well understood. The evidence thus 
far available indicates that the deterioration of irrigated land may be 
due in some cases to obscure diseases of the plants or to some derange- 
ment of the processes of nutrition rather than to a lack of f ertility. as 
that term is understood in agriculture under rainfall. Whether or 
not there is inherent in irrigation agriculture a set of adverse conditions 
other than those related to the rise of alkali remains to be determined. 
In any event there is reason for believing that many of our irrigated 
districts may long continue in a high state of productivity because the 
available land so much exceeds the available water that when any 
particular tract of land becomes unproductive the water may be 
carried to new land at small additional expense. But such shifting 
of water to new land must often result in some individual hardships 
where a farmer has all his capital invested in the land that is aban- 
doned. 

Note. — The Thirteenth Census (Vol. V, p. 846) gives the follow- 
ing figures concerning irrigation development in the United States: 



All classes of enterprises 

U.S. reclamation service 

U.S. Indian service 

Carey act enterprises 

Irrigation districts 

Co-operative enterprises 

Individual and partnership enter- 
prises 

Commercial enterprises 



Acreage Irrigated 
in 1909 



13,738,485 
395,646 
172,912 
288,553 
528,642 
4,643,539 

6,257,387 
1,451,806 



Acreage Enter- 
prises Were 
Capable of Irri- 
gating in 1910 



19,334,697 

786,190 

376,576 

1,089,677 

800,451 

6,191,577 

7,666,HO 
2,424,116 



Acreage 

Included in 

Projects 



31,111,142 
1,973,016 
879,068 
2,573,874 
1,581,465 
8,830,197 

10,153,545 
5, IX 9,977 



-Editor. 



39. NEED OF IRRIGATION IN THE HUMID REGION 1 
By MILO B. WILLIAMS 

The people of this country have come to associate the practice of 
irrigation with the growing of crops in localities where the scanty 
rainfall produces only desert plants. But in fact supplemental irri- 
gation is not only possible but needed in the growing of the more 
valuable crops throughout many portions of the humid region. 

A climate having an annual rainfall of 20 inches or more is gener- 
ally regarded as humid, for where this amount of rain is fairly well 

1 Adapted from "Supplemental Irrigation in the Humid Region," Yearbook 
of the Department of Agriculture, 191 1, pp. 309-20. 



LAND AND OTHER AGENTS OF PRODUCTION 143 

distributed throughout the year the arable land can usually be 
farmed. This measure of aridity divides the United States into two 
nearly equal parts, east and west, marked by a belt of semiarid coun- 
try located near the ninety-ninth meridian. Although this division 
is based upon the moisture supply of the climate, it is not a true index 
of the need of irrigation, as many sections having an annual rainfall 
of more than 20 inches do not during the growing season receive a 
dependable precipitation sufficient for farming purposes. Rains must 
come at such times and in such amounts as will properly moisten the 
soil for the preparation of the seedbed and will furnish a reasonably 
constant supply of moisture to germinate the seed and develop the 
plant until it reaches maturity. A check in this supply of soil moisture 
at any stage of the growth affects the quality and quantity of the 
yield and may greatly reduce the profits of the grower. The real test 
of what is a humid section is therefore not the total annual rainfall, 
but the monthly, and, in the case of many plants, the weekly amount 
during the growing season. Viewed in this light, irrigation becomes 
a national need rather than merely a western practice. 

One of the main advantages of farming under irrigation is that 
the water supply needed for the growth of crops, which is one of the 
most, if not the most, uncertain factors in other farming, is very 
largely under the control of the grower. This advantage, however, 
has hitherto scarcely been grasped by the farmers in the humid sec- 
tion, and few realize that with a small outlay an irrigation plant can 
be installed which will insure them against complete or partial crop 
failures during droughts. Although the annual precipitation in the 
citrus regions of Florida is 55 inches, while that at Riverside, Cali- 
fornia, is only 10. 74 inches, one should not conclude that irrigation is 
not necessary in the former, as there are periods when less than 1 inch 
of rain falls in 30 days, and at such times the application of a small 
amount of water may be followed by as good results as at Riverside. 
Under average conditions it is safe to say a drought occurs whenever 
the precipitation in any 15-day period falls below 1 inch. It has been 
the writer's observation that crops will usually suffer if they do not 
receive considerably more than this amount of rain, especially during 
the spring and early summer months. Later in the season this 
quantity may not be needed excepting for late garden truck and some 
fruits. The accompanying table, compiled from rainfall records of 
the Weather Bureau taken at representative points in the humid 
region during 10 growing seasons, 1900-1909, inclusive, shows the 



144 



AGRICULTURAL ECONOMICS 



average annual rainfall, the number of periods of 15 days or more 
with less than 1 inch of rainfall, and the total number of days in the 
ten years that droughts extended over the 15-day period. 



Stations 



Average Annual 
Rainfall 



Number of 15- 
Day Periods or 
over with Less 
than 1 Inch 
of Rain 



Number of Days 
When Irrigation 
Was Required* 



Ames, Iowa . . . 
Oshkosh, Wis. . 
Vineland, N J . 
Columbia, S.C. 
Selma, Ala. . . . 



2 3 
27 
46 
62 
60 



190 
292 
352 
568 
724 



* No days counted till after a 15-day period with less than 1 inch of rain. 

Of the north-central states, Iowa, Illinois, Ohio, and Indiana are 
probably the most favored states in the country from an agricultural 
point of view, and their common field crops are comparatively little 
injured by drought, though the more delicate fruit and vegetable crops 
suffer more. In Michigan, Wisconsin, and the northeastern part of 
Minnesota the needs of irrigation are much greater. The upland 
soils are a mixture of coarse and fine glacial materials, porous and non- 
resistant to drought, yet responsive to tillage and adapted to the 
growing of garden truck, berries, hardy fruits, hay, legumes, and 
sugar beets when moisture is applied. The lowland soils are sedi- 
mentary and vary in texture from heavy loams to porous peat. When 
thoroughly drained these soils are adapted to the growing of many of 
the most valuable crops. The wet condition before drainage does not 
indicate that the soils are immune from drought. Irrigation and 
drainage must go hand in hand to insure the greatest returns. For 
such purposes the water resources of these states are most abundant. 
Creeks and small rivers abound, and hundreds of lakes, large and 
small, afford the possibility of constant supplies for wilting crops in 
dry weather. 

The growing seasons are short and the winters cold and bleak; 
it is necessary for the farmer to grow his crop without delay or set- 
back. Late planting caused by a dry spring may result in the crop 
being frozen in the fall before it is matured. In the spring of 1910 
Wisconsin experienced a drought which did great damage in the 
garden sections. Fields prepared for the setting out of plants stood 
idle for weeks waiting for a rain to supply the necessary moisture, 
and when the rain came, at a late date, plants were rushed in on large 
acreages. This resulted in the maturing of many crops at the same 



LAND AND OTHER AGENTS OF PRODUCTION 145 

time and caused a flooding of the markets and a lowering of prices 
to an unprofitable figure. A later drought the same season caused 
the celery crop, valued at $1,000 per acre, growing on peat lands near 
Waupaca, Wisconsin, to develop seed sprouts, which ruined the crop. 
An abundant water supply was within a few feet of the surface and 
a pumping plant could have been installed and the crop irrigated with 
profits that would have been realized from one acre. 

On the other hand, 1 J acres of strawberries at Neenah, Wisconsin, 
yielded berries valued at $200 after the unirrigated vines in the same 
field had stopped bearing. An onion crop grown under irrigation in 
the same locality yielded 483 . 8 bushels per acre and the onions took 
first premium for quality at the Winnebago County fair. This crop 
was irrigated six times during the months of June and July and 
received 3 . 04 inches of water by irrigation and 5.77 inches by rainfall. 
This seemingly large amount of water was made necessary, as most of 
the rain came in one large storm and the balance in eleven small 
showers, none of which moistened the soil to a sufficient depth. Good 
results have also been secured from the irrigation of raspberries and 
apples in the same section of Wisconsin. 

The states bordering the Atlantic Ocean from Maine to Virginia 
include a narrow strip of agricultural country wherein great possi- 
bilities seem to exist for that intensive type of farming to which supple- 
mental irrigation is adapted. Many thousands of acres of virgin 
lands still lie idle awaiting the time when they will be reclaimed 
by scientific farming and moisture control. The greatest demand 
made by the markets upon agriculture in this region is for food crops 
for human consumption. Great areas are adapted to the production 
of these crops, and probably some of the most suitable lands are 
untouched by the plow because of their lightness of soil and non- 
resistance to the effects of drought. The Atlantic slope is well sup- 
plied with water resources for irrigation. 

The climate of these states is tempered sufficiently by the ocean 
to give longer growing seasons than are found in the north-central 
states, thus enabling early summer and late fall vegetables to be 
raised with irrigation; and all tree fruits, from the northern apple to 
the temperate peach, thrive under care. Soil-improving legumes can 
also be grown in these sterile, tillable, sandy sections if moisture be 
assured. During a New Jersey drought in the spring of 191 1 the early 
strawberry crop in many sections was completely ruined. The value 
of this one year's crop would have paid the farmers affected thereby 
250 per cent interest on a most expensive spray irrig?*Kwa system. 



146 AGRICULTURAL ECONOMICS 

The southern states east of Texas and bordering on the Gulf of 
Mexico and the Atlantic Ocean cover one of the richest areas of unde- 
veloped agricultural wealth in the United States. Nature has blessed 
this region with long growing seasons and an abundant water supply, 
which, if evenly distributed, would make this one of the garden spots 
of the world. The soils of the South are as a rule porous and easily 
worked, but lack fertility. The f ertilizers which are applied to make 
up for this deficiency often either He inert during drought or are 
leached out by torrential rains. The annual rainfall varies with the 
locality from 45 to 55 inches. This insures an abundant water supply 
if properly conserved. There are also many artesian basins, where 
good wells of large capacity can be obtained for irrigation. Florida 
produces the most delicate fruit and vegetable crops in the dead of 
northern winter, and the neighboring states can produce as valuable 
crops in the early spring. Intensive farming usually has been ham- 
pered by the uncertainty of the spring rainfall, and irrigation is needed 
to insure a more constant supply of soil moisture. Rains come in 
torrential storms, which dissipate their waters in surface run -off. 
Droughts follow, with intense heat at critical periods of the plant's 
growth. Over the greater part of this entire region the summers are 
wet, the winters dry, and the rainfall of the spring and fall months is 
uncertain. 

A combination of irrigation and drainage at Sanford, Florida, has 
transformed worthless lands into those producing crops of celery 
valued at $2,000 per acre for one crop. Irrigation of the uplands of 
this state shows similar results in citrus culture. Irrigation at Albany, 
Georgia, has made it possible to produce an abundant growth of 
alfalfa on worn-out cotton lands. The waters of a flowing well near 
Selma, Alabama, which have been wasted for forty years, have con- 
verted portions of a worn-out plantation into a productive garden. 

40. DRY FARMING AS A MEANS OF INCREASING OUR 
AGRICULTURAL PRODUCT 1 

By E. C. CHILCOTT 

Several conditions have contributed to the general interest in dry- 
land farming. The people of the United States have become aware 
that government lands suitable for ordinary agriculture are almost a 

1 Adapted from "Dry-Land Farming in the Great Plains Area," Yearbook of 
the Department of Agriculture, 1907, pp. 451-68. 



LAND AND OTHER AGENTS OF PRODUCTION 147 

thing of the past. With our rapidly increasing population it will soon 
become necessary to utilize for crop production a large area of the 
rich arable land of the West which has insufficient rainfall for ordinary 
agriculture. Then, also, during the last two or three years there has 
been rather more than the average amount of rainfall over the larger 
part of the semiarid region, and many people acquainted with present 
conditions firmly believe that the climate of this region is rapidly 
becoming more humid. This belief is without foundation in fact, but 
since this idea is generally held and has become widely advertised it 
becomes important to emphasize the fact that there is no adequate 
basis for hoping that the climate of the arid West is undergoing any 
appreciable change as regards precipitation. 

The conquest of the semiarid West, to be successful and to be 
accomplished without large and costly failures, must be made slowly 
and by the careful application of definitely ascertained scientific facts. 
The boundaries of existing settlements may be gradually extended, but 
any wholesale attempts to colonize large areas of this semiarid land 
with people accustomed to farming only in humid regions or not accus- 
tomed to farming at all must surely result in disastrous failures, and 
such failures can only hinder the real progress of western development. 

Somewhere within the bounds of the Great Plains area (from the 
ninety-eighth meridian on the east to a contour line east of the Rocky 
Mountains, marking an altitude of 5,000 feet, on the west) will ulti- 
mately be drawn the line which shall represent the western boundary 
of the great agricultural region known as the Mississippi Valley. 
Beyond this will be detached areas, but this will be the margin of the 
continuous area. It is therefore within this Great Plains area that 
experiments must be conducted that will determine what portions 
can be used for general dry-land agriculture and what portions can 
best be utilized for stock raising. Where this industry becomes the 
predominating one, means must be devised for supplementing the 
natural grasses of the range with forage plants, either annual or 
perennial. Cultivated grains imported from foreign countries having 
a similar climate must here be tested and selected; here also must 
be carried on extensive experiments in breeding agricultural plants 
along the lines that will adapt them to the peculiar conditions of 
soil and climate which here prevail. 

The light rainfall of this region is by no means an unmixed evil. 
It is probably due to this that the soils of this area are of such won- 
derful fertility. While the scanty rainfall has not tended to produce 



148 AGRICULTURAL ECONOMICS 

a particularly luxuriant growth of vegetation during past ages, it has 
served to preserve within the soil the products of decomposition of such 
vegetation as has been produced. It has also assisted in the produc- 
tion of large quantities of those chemical salts upon which plants 
depend for their nourishment, and the evaporation being in excess of 
the precipitation, the tendency has been to keep these beneficial salts 
near the surface instead of having them either carried far below the 
reach of plant roots by seepage or removed by the excess of water 
which occurs in more humid countries. 

Already methods have been devised and are in practice throughout 
the area whereby the moisture of the soil can be conserved and crops 
may be raised under conditions of drought that have in the past 
proved absolutely prohibitive of agricultural production. The intro- 
duction and development of drought-resistant plants is now enabling 
farmers in many parts of the area to produce crops of grain during 
years of drought so severe that it would be impossible to raise any of 
the grains that were originally introduced into the area from the more 
humid parts of the country. The development of cultural methods, 
crop rotations, plant adaptation, and farm organization is only just 
begun, and in time there will be no part of this area that will not be 
producing much more than at the present time. 

The success of dry farming as it is now practiced in the semi-arid 
districts of the Great Plains area depends upon the application in the 
most thorough manner of the principles of tillage which have been 
practiced to a greater or less extent for several hundred years. Settlers 
who came to the more humid portions of the trans-Mississippi region 
soon discovered that with the fertile and easily tilled soils and abun- 
dant rainfall of these districts it was possible to produce crops suc- 
cessfully with much less labor than is usually bestowed upon them in 
the less-favored portions of the East. This led to very superficial 
and slovenly methods of tillage. Often the land was plowed only once 
in several years (and then only to a depth of 3 or 4 inches), the grain 
being " disked in" upon the unplowed stubble of the previous year's 
crop. This system became less and less remunerative as the soil 
became exhausted of organic matter, and the farmers learned by 
costly experience that even in the more humid portions of the Great 
Plains some other system of tillage would be necessary in order to 
maintain the fertility of their farms. 

As settlements extended westward into the drier districts the same 
shiftless methods were used as those at first practiced farther east. A 



LAND AND OTHER AGENTS OF PRODUCTION 149 

series of dry years which culminated in the disastrous drought of 1894 
not only demonstrated that these methods were unprofitable where 
the problem of moisture conservation was most important, but it 
actually served to depopulate a considerable part of the more arid 
portions of the Great Plains area. Many farmers abandoned their 
farms, which were sold for taxes and finally fell into the hands of large 
land companies. 

Since 1894 there has been a somewhat regular increase in the 
annual precipitation throughout the Great Plains area, until in 1905 
it reached the highest point recorded by the Weather Bureau, but only 
very slightly in excess of the precipitation of 1883. This increase in 
precipitation, which made the agricultural conditions more favorable, 
together with the demand for cheap farm lands, had the effect of 
causing these large land companies to exploit what is now generally 
known as "dry farming." 

Many of the settlers had learned by bitter experience that it 
would be necessary to adopt even more thorough methods of tillage 
here than had been required in the more humid east. No new dis- 
coveries had been made as to the principles or practices of thorough 
tillage, but it had been learned that thorough tillage was necessary. 
It has long been known that the loss of moisture from a stubble field 
left bare by harvesting the crop is greater than at any other time. 
This is particularly true in the semiarid districts, where the tempera- 
ture and wind velocity are usually very high at this time of year. In 
order to avoid this loss of moisture, it is desirable to plow the land as 
soon as possible after the crop is removed. 

Where the annual precipitation is only barely sufficient for the 
crop it is of the greatest importance that the soil be kept in such con- 
dition that it will be able to store as large a proportion of the rain that 
falls as possible. It is therefore evident that plowing should not only 
be done as early as is possible in the fall or late summer, but the plow- 
ing should be deep enough to afford a reservoir to receive the rains that 
fall during the autumn and winter following. 

If the land is plowed during hot, dry, summer weather and is 
allowed to lie loosely as it is left by the plow, there will be a great loss 
of moisture by evaporation. It is therefore necessary thoroughly to 
compact the soil as soon as possible after plowing. 

If rains occur after the plowing and packing have been done they 
will form a crust upon the surface and the evaporation from the soil 
will be greatly increased. It is therefore advisable to harrow the 



150 AGRICULTURAL ECONOMICS 

surface with a light harrow after every rain that occurs during the fall, 
and, in the southern portion of the area, in the winter. In the spring 
the soil should be thoroughly harrowed until seeded. 

Seeding of small grains should be much lighter in the arid districts 
than in the humid districts. It is probable that as little as one- 
half bushel of wheat per acre can be profitably used in the drier 
portions. After the seeding has been done in the spring the land 
should be harrowed after every rain until the grain has reached the 
height of 3 or 4 inches. This will tend to conserve the moisture and 
will also destroy many weeds. The seeding should be done with 
some kind of a drill that will distribute the seed evenly and deeply 
and pack the soil around it thoroughly. Various types of press drills 
are upon the market, nearly all of which give satisfaction. 

The practice of alternate cropping and summer fallowing is a 
common one in the semiarid region. Where this is done the land is 
kept thoroughly tilled during the year of summer fallow so as to store 
up the moisture of two years for the use of one crop. The value of 
this practice of allowing the soil to remain bare during the entire 
season is questionable, for, though it may serve to give good results 
for a few years, it must necessarily result in an almost complete 
destruction of the organic matter in the soil. This will bring about 
such a physical condition of the soil that it will no longer retain 
moisture as it did when it contained an abundant supply of organic 
matter. A much better practice is to raise some kind of legume crop 
which can be turned under before it becomes hard and woody and 
while there is still a sufficient amount of moisture in the plants and 
in the soil to cause rapid decomposition. The physical as well as the 
chemical composition of the soil will be improved by this practice 
instead of injured, as is the case where the bare summer tillage is 
practiced. 

It will therefore be seen that dry farming depends upon the utiliza- 
tion of what has long been known, but insufficiently practiced, rather 
than upon any new discoveries; upon the adaptation of well-known 
means to a definite end, rather than upon the establishment of any 
new system. It is the return to time-tested methods of intensive 
cultivation for the purpose of moisture conservation in place of the 
shiftless and superficial methods of extensive farming which sprang 
up upon the rich and easily tilled prairies of the subhumid belt. 

How successful these intensive methods will be in overcoming the 
effects of severe and long-continued drought remains yet to be deter- 



LAND AND OTHER AGENTS OF PRODUCTION 151 

mined. As before stated, the exploiting of dry farming on the Great 
Plains has been carried on during a period of unusually heavy rain- 
fall. In all probability droughts as severe and as long continued will 
occur in the future as have occurred in the past. Then and not until 
then, will these methods be subjected to the decisive test. There 
will always be a borderland where stock raising will be the important 
industry with farming as a side issue. The actual settler who will 
give his personal attention to the details of farm work, and who has 
had sufficient experience in farming under somewhat similar conditions 
to make him familiar with the general practices required in the semi- 
arid districts, and who has sufficient capital to buy one or two sections 
of land, to build a house and barn, and to stock the farm with a hun- 
dred head of cattle or more, together with the necessary teams, will 
have a fair chance of success where the settler who owns but a quarter- 
section of land and has only sufficient capital to buy a team and the 
necessary farm implements would meet with almost certain failure. 
It is believed that it must be to this class of well-to-do farmers who 
will combine stock raising with farming that we must look for the 
agricultural development of a large portion of the semiarid districts. 
Companies recently organized for the purpose of carrying on farming 
operations on a large scale with the use of steam tractors also give 
some promise of success. It is to be hoped that such companies may 
prove to be permanently profitable, for it will mean much to the agri- 
cultural development of an immense area of very fertile land. 

41. THE INTRODUCTION OF DRY-LAND PLANTS 1 
By A. N. HUME and MANLEY CHAMPLIN 2 

Over a vast area of our western states the crop failures during the 
four-year period 1910-1913 show with great force that we need to 
increase the list of drought-resistant cereals. As settlers go into the 
driest upland regions of our western states from the Mexican boundary 
north to Canada, they find that the staple small grains are less certain 
than in the moister regions farther east. The farmers give up the 
struggle to farm in dry regions with the varieties adapted to moist 
regions, and go back east. The hardy pioneers who remain and keep 
up the fight see more clearly the need of cultivating varieties of plants 

1 Adapted from Bulletin 156, South Dakota Agricultural Experiment Station, 
pp. 116-22. 

3 The first two paragraphs of this reading are borrowed from Bulletin t$8 of 
the same station, written by N. E. Hansen. — Editor. 



152 AGRICULTURAL ECONOMICS 

from similar dry climates of the Old World. A giant millet, called 
proso, and a grain sorghum, called kaoliang, have recently been intro- 
duced to meet this need. 

In the dry interior desert region north of the Sea of Aral in Turke- 
stan and north into Siberia, proso is a great food staple of the Kirghiz 
nomads, tent-dwellers in the desert. It is a great advantage to have 
a grain like proso, that can be sown in the spring after it gets too late 
for other grains, a grain that will serve as a catch crop and yet ripen 
early enough to afford a satisfactory yield. The value of proso as a 
feed for cattle, sheep, and swine has been investigated, and these 
experiments demonstrate that stock may be fattened ready for the 
Chicago market without any other grain than proso. That proso 
may be raised successfully as a field crop in South Dakota has been 
shown through a number of years by the Agronomy Division of the 
Station. We now know that a number of varieties of proso may be 
profitably raised anywhere in the state and are specially suited for 
the western half. One point in its favor is that the grain may be 
sown after it is too late to sow wheat, although for the best results it 
should not be sown too late. 

In the western part of Kansas, Oklahoma, and Texas crops known 
in a general way as grain sorghums have been the mainstay of the 
settlers. It is indeed doubtful whether the western part of these 
states could have been permanently settled except by cattlemen had 
it not been for such crops as kafir and milo. 

This being the case, it was but natural that investigators who were 
on the lookout for crops for the dry regions should desire some sort of 
a grain sorghum that would do the same thing for the northern part of 
the Great Plains that kafir and milo had done for the southern part. 
Some progress was made by selecting the earliest dwarf plants from 
the kafir and milo, and the resulting varieties, dwarf kafir and dwarf 
milo, are matured successfully as far north as the southern part of 
South Dakota. For the principal part of western South Dakota 
something still earlier was needed. The United States Department 
of Agriculture learned through its explorers and agents in the Orient 
of a very early-ripening grain sorghum grown by the people of Man- 
churia. This crop was known as kaoliang, a word made up of -the 
Chinese kao and liang, meaning tall or great millet. The Man- 
churians use the leaves for fodder, the stalks for building and basket 
material, and the seed for food for themselves and their live stock, 



LAND AND OTHER AGENTS OF PRODUCTION 153 

besides distilling a portion of it and making an alcoholic liquor. Since 
Manchuria lies in approximately the same latitude as South Dakota, 
and is somewhat similar in climatic conditions, it was thought likely 
that the kaoliang from there would do well here, and trial lots of seed 
were furnished to the South Dakota Experiment Station in the spring 
of 1909 and placed on trial. 

The crop grown in this trial was found to be extremely variable. 
There were tall stalks, short stalks, compact heads, and loose heads. 
Apparently the native Manchurians had not given much attention to 
selecting seeds for a uniform type. ' Thus it became necessary to do 
considerable selective breeding work before the seed was adapted to 
general distribution and to machine handling. Selection of the 
heaviest, most compact heads on stalks of a uniform height was 
practiced, and selective breeding continued through 1912, 1913, and 
1914, until in 1914 it is estimated that kaoliang from these two 
original selections is growing on 1,000 farms in central and western 
South Dakota. 

Kaoliang, though primarily valuable as a grain crop, may also be 
properly called a dual-purpose crop. In a five-year trial at High- 
more Substation and a three-year trial at Cottonwood Substation it 
has never failed to mature its seed. The seed is usually ready to be 
harvested by September 15. At Highmore, the average yield for the 
five years from 1909 to 1913, inclusive, has been 16.5 bushels from 
one strain and 13.8 bushels from another. The highest yield was 
19. 2 bushels in 1910, and the lowest was 10.3 bushels in 191 1. The 
average yield of Minnesota No. 13 yellow dent corn for this same 
period is 12.6 bushels, showing that the climatic conditions were 
decidedly severe. At Cottonwood in 191 2, kaoliang yielded an aver- 
age of 23 . 7 bushels per acre in farm system No. 4 as compared with 
22.5 bushels per acre for Minnesota No. 13 corn. 

Every season since kaoliang was introduced there have been 
drouth periods of considerable duration both at Highmore and Cotton- 
wood. The drouth resistance of kaoliang is due partly to its ability 
to recover rapidly after having remained dormant for a time, which 
characteristic is common to all grain sorghums, and partly to its low 
moisture requirements. A trial made at the Akron, Colorado, Sub- 
station shows that kaoliang required about one-third as much water 
to produce a gram of grain as was required by northwestern dent, a 
very early variety of corn. For producing a gram of grain and forage 



154 AGRICULTURAL ECONOMICS 

about five-sixths as much water was required as for producing the 
same weight of grain and forage in corn. 1 

42. DRAINAGE AS A MEANS OF RECLAIMING LAND 2 
By SAMUEL H. McCRORY 

Back and Jacob swamps are located on the south side of the 
Lumber River, in Robeson County, North Carolina. The watershed 
of Back Swamp is about 17 miles long and varies in width from one- 
half to 2 1 miles, and contains 21,550 acres, about one- third of which 
is under cultivation. Jacob Swamp has a watershed 9J miles long 
and varies in width from 1 to 4 miles. Its drainage area contains 
9,980 acres, approximately one-fourth of which is cultivated land. 
Gum and Cotton Mill branches are two small tributaries which empty 
directly into the river and drain 1,320 acres, about 10 per cent of 
which is under cultivation. 

The natural drainage of nearly all the land in the district is poor. 
The land on the ridges that can be most easily drained has been cleared 
and is under cultivation. The lowlands and that in the swamps is 
still in timber, although in places attempts have been made to clear 
this land and to farm it. The land will grow fine crops in dry years 
when conditions are favorable, but in wet years the crops are failures. 
The greater part of the timberland in the district has such poor drain- 
age that until improved outlets are provided for the drainage it cannot 
be cleared and cultivated successfully. The cultivated land has almost 
the same need for drainage as the unimproved. Attempts have been 
made to drain this land, but on account of the poor outlets for the field 
ditches it has not been possible to obtain the results desired; nearly 
every field in the district shows the need of better drainage. 

During the rainy season the entire district is wet. The flat char- 
acter of the watershed makes the movement of the water to the 
present drainage channels extremely slow; over much of the district 
the water stands in the low places until it evaporates. The present 

1 The extensive use of alfalfa in the drier sections is made possible by reason 
of its deep-rooting habit, and much work has been done in the direction of per- 
fecting its drought-resisting qualities. Similarly, durum or macaroni wheat ex- 
tended the wheat-growing area in semiarid regions. See Yearbook of the Department 
of Agriculture, 1903, pp. 329, etc. — Editor. 

2 Adapted from "A Report upon the Back Swamp and Jacob Swamp Drainage 
District, Robeson County, North Carolina," Bulletin 246, Office of Experiment 
Stations, United States Department of Agriculture, pp. 8-33. 



LAND AND OTHER AGENTS OF PRODUCTION 155 

drainage channels, even if cleared, are entirely inadequate to remove 
the drainage from the district or give a satisfactory outlet for lateral 
or farm drainage. 

Of the total precipitation that falls upon a given tract of land a 
certain portion is taken up by vegetation, some is removed by evapo- 
ration, some sinks into the ground, and some finds its way over the 
surface into natural or artificial channels and thence into the larger 
streams. The water removed in the last-mentioned manner is known 
as run-off; a certain portion of the water that sinks into the ground 
later appears also as run-off. It is that part of the precipitation which 
appears as run-off that must be dealt with in reclaiming lands that 
under natural conditions are perpetual swamps or that are periodically 
damaged by the overflow of adjoining streams. 

The most important factors affecting the rate of run-off from a 
given watershed are: precipitation; the size, shape, and topography 
of the watershed; the nature of the soil; the character of the vegeta- 
tion; and the rate of evaporation. Of these, the most important con- 
sideration is precipitation. 

The annual rainfall at Lumberton (a station in the immediate 
vicinity of Back and Jacob swamps) varies from a minimum of 38.43 
inches in 1909 to a maximum of 62 . 76 in 1 901. The table of monthly 
and annual rainfall shows that February, June, July, and August have 
a normal precipitation exceeding 5 inches per month. The minimum 
monthly rainfall recorded was 0.28 inch in October, 1896, and the 
maximum monthly was 12.52 inches in May, 1901. The maximum 
recorded precipitation in 24 hours occurred September 14 and 15, 
1904, when 5.87 inches fell. During 14 years there were 4 days 
in which there was a precipitation of 4 inches or more and 9 days in 
which more than 3 inches fell in 24 hours. 

Aside from the storms of 1901 and 1908, there are no storm periods 
that show an average daily precipitation in this region of more than 
o. 75 of an inch over a long period of time, and as the heaviest storms 
generally occur in the months from May to September, when condi- 
tions are most favorable for the soil to absorb precipitation, and as the 
soil absorbs water readily and responds quickly to drainage, it was 
decided that ditches designed to remove a run-off of one-half inch of 
water in 24 hours from the entire watershed of Back Swamp and three- 
fourths of an inch of water in 24 hours from the watershed of Jacob 
Swamp would afford good drainage. The higher rate of run-oft 
assumed for Jacob Swamp is due to the fact that its area is less than 



156 AGRICULTURAL ECONOMICS 

half that of Back Swamp. The size of the upper portions of the main 
ditch and of the lateral ditches was determined by the requirements 
of the machinery to be used in their construction; all lateral ditches 
will remove a run-off of i inch or more of water in 24 hours from their 
watersheds. The ditches are planned to remove this amount of 
water when the depth is but 5 . 5 feet, and will remove about 30 per 
cent more when running bank full. 

The improvements recommended are in the nature of straighten- 
ing and clearing the Lumber River channel, and are estimated to cost 
about $3,500. The main feature of the improvements, however, is 
the construction of efficient ditches in the principal drainage channels 
within the district. These ditches are designed with sufficient capa- 
city to take care of all the water that they may reasonably be expected 
to be called upon to handle, and they are of sufficient depth to act as 
outlets for future farm drainage in the district. The ditches are to 
follow, in general, the natural "runs" of the swamps, but in one or 
two cases, as, for instance, in Cypress Branch and Jacob Swamp, cer- 
tain divisions have been made which it is believed will prove advan- 
tageous to the construction of the ditches and for the handling of the 
water. 

The toal cost of the recommended improvements, which will make 
available for cultivation all the land within the district, 32,850 acres, 
is estimated at $142,621. This gives a cost per acre of $4 . 34. Since 
the expenditure recommended may reasonably be expected to more 
than double the land values of the district, it would seem that the 
investment should be an attractive one from this standpoint 
alone. 

The work has been planned with a view to permanence and effi- 
ciency rather than to cheapness of first cost, but it is not believed that 
any recommendations have been made that will not be amply justified 
by results. 

Note. — Various estimates have been made of the amount of land 
which might be reclaimed by drainage. Some students place the 
total area of swamp and overflowed lands of the United States at 
80,000,000 acres. This is nearly three times the area of Great Britain 
and Ireland (see Senate Document 443, 60th Congress, 1st session). 
While this is an important and attractive field of effort, we must not 
fail to measure the cost of such reclamation works against their future 
productivity, and compare this with results in other possible lines of 
agricultural expansion. — Editor. 



LAND AND OTHER AGENTS OF PRODUCTION 157 

43. UTILIZING PLANTS OF HIGH WATER REQUIREMENTS 1 
By 0. W. BARRETT 

For many years the lack of a wet-land root crop has been felt 
throughout the South Atlantic and Gulf states. There is a vast area 
of semicultivated or uncultivated land in these sections which is too 
wet to admit of the cultivation of general crops. Some 40,000 acres 
in the Carolinas and Georgia have been fully abandoned, and at least 
half as much ground is only planted once in two to four years on 
account of the decreased profits in rice culture in that region. As a 
result, efforts have been made to find profitable crops which may be 
grown in the rich soils of the coast-plain area of both of the sections 
mentioned which are too wet for profitable potato culture. The 
recent interest in starch roots, which may be utilized in the produc- 
tion of alcohol as well as for stock feeding, has lent a still greater 
importance to this question. 

There are four types of root crops known as aroids, namely, 
yautias, alocasias, dasheens, and taros, which promise much 
in this direction. Though they have been cultivated in the tropics 
for centuries, they are practically new to the agriculturists of America. 
However, their crop season is sufficiently short to allow of their 
maturing in ordinary seasons before the advent of killing frosts. 

Many of the varieties are of use as salad plants, though the prime 
object, especially of the yautia and dasheen varieties, is the production 
of starch. The tubers of many varieties are suitable for table use, 
and the roots of nearly all forms may be used as stock food, either 
fresh or when ground into meal. Those which produce small but 
numerous tubers are particularly adapted for the production of 
alcohol. 

These crops require only a moderate amount of attention, ferti- 
lizers are seldom required, and insect and fungous pests are com- 
paratively few. Yields are heavy, in some cases two to four times 
the average yield for potatoes. Finally, they are adapted to soils too 
wet for other root crops, such as sweet potatoes and cassava. 

Note. — Some other writers are less enthusiastic concerning the 
possibilities of the aroids. Whatever the event may prove, they 
represent a significant line of experiment in the utilization of wet lands. 
The newspapers reported last season that flour was being milled from 

1 Adapted from "Promising Root Crops for the South," Bulletin 164, Bureau 
of Plant Industry, United States Department of Agriculture, pp. ;-S, 28-29. 



158 AGRICULTURAL ECONOMICS 

dasheens grown in Florida, and that the growers were confident of 
making a commercial success of the venture. 

The cranberry has long been used as a reclaimer of bog lands, 
nearly or quite useless for other crops — 18,000 acres in Massachusetts, 
New Jersey, and Wisconsin. Rice is doubtless the largest user of wet 
lands in the United States. In Arkansas alone it has aided in bringing 
100,000 acres of river-bottom lands into profitable use within the last 
few years. — Editor. 

C. Fertility as a Limiting Factor in Agricultural Production 

44. CHEMICAL CONTENT AS A MEASURE OF PRODUCTIVE 

POWER 1 

By CYRIL G. HOPKINS 

In brief, there are ten elementary substances that bear the same 
relation to the making of crops as brick and mortar bear to a wall 
of masonry. If any one of these ten elements is entirely lacking, it 
is impossible to produce a grain of corn or wheat, a spear of grass, or 
a leaf of clover. 

Two elements, carbon and oxygen, are taken into the plant from 
the air through the leaves; hydrogen is secured from water absorbed 
by the roots; and iron and sulphur are also supplied by nature in 
abundance. But the other five elements require careful considera- 
tion if lands are to be kept fertile. These are potassium, magnesium, 
calcium, phosphorus, and nitrogen; and every landowner ought to 
be as well acquainted with these five elements as he is with his five 
nearest neighbors. 

Instead of making this acquaintance and gaining a knowledge of 
important facts and principles, the average farmer in the older states, 
with failing fertility, has made the acquaintance of the fertilizer agent; 
and instead of purchasing what he needs for the permanent improve- 
ment of his soil, he buys what the agent wants to sell, with the common 
result that the seller is enriched while the soil is merely stimulated to 
greater poverty. 

Potassium. — A careful study of the facts shows that potassium is 
one of the abundant elements in nature; that the average crust of the 
earth contains 2 J per cent of this element; and that normal soils bear 
some relation in composition to the average of the earth's crust. If 
normal soil had the same percentage, then the plowed soil of an acre 

1 From Circular No. 167, Agricultural Experiment Station, University of 
Illinois, pp. 3-9. 



LAND AND OTHER AGENTS OF PRODUCTION 159 

6f inches deep (corresponding to 2,000,000 pounds of soil) would con- 
tain 50,000 pounds of potassium. In Illinois, the normal soils actually 
do contain from 25,000 to 45,000 pounds per acre of this plant-food 
element in the first 6f inches, while less than 4 pounds of potassium 
would be added in an application of 200 pounds of the most common 
commercial fertilizer. The Illinois system of permanent fertility 
does not provide for the purchase of potassium for normal soils, but 
it does provide for the liberation of an abundance of that element 
from the practically inexhaustible supply in the soil. This liberation 
is accomplished by the action of decaying organic matter plowed under 
in the form of farm manure or crop residues, including clover or other 
legumes. 

Only where the soil is positively deficient in potassium susceptible 
of liberation, as is the case with some sand soils and with most peaty 
swamp lands, need potassium be purchased in permanent systems of 
either grain farming or live-stock farming; but in market gardening? 
or in raising timothy hay for the market, commercial potassium may 
be required, and on some worn soils especially deficient in decaying 
organic matter the temporary use of kainit is often advisable. 

Magnesium and calcium. — As a general average, the normal soils 
of Illinois contain more than four times as much potassium as mag- 
nesium, while the loss by leaching and cropping in rational systems 
of grain or live-stock farming may be actually greater for magnesium 
than for potassium, so that magnesium is more apt to become deficient 
in soils than is potassium. 

The calcium supply in normal soils is also only one-fourth that of 
potassium, while the average loss by cropping and leaching is four 
times as great, so that 16 to 1 expresses the relative importance of 
calcium and potassium in the problem of permanent fertility on nor- 
mal Illinois soils. 

All limestones contain calcium; and the common dolomitic lime- 
stone in the almost measureless deposits of northern Illinois contains 
both calcium and magnesium in very suitable form both for plant 
food and for correcting or preventing soil acidity. In the Illinois 
system of permanent fertility, ground natural limestone is applied, 
where needed, at the rate of about 2 tons per acre every four years. 

Phosphorus. — Attention was called to the fact that 2,000,000 
pounds of the average crust of the earth contains 50,000 pounds of 
potassium; but compared with this we find only 2,000 pounds of 
phosphorus. Likewise, the plowed soil of an acre of average Illinois 
land contains about 35,000 pounds of potassium but less than 1,200 



160 AGRICULTURAL ECONOMICS 

pounds of phosphorus. When grain is sold from the farm, about 
equal amounts of phosphorus and potassium are carried away, while 
in independent systems of live-stock farming much more phosphorus 
than potassium leaves the farm. 

With phosphorus at 3 cents a pound, one can double the amount 
of that element contained in the plowed soil of our $200 land 
at a cost of $35 an acre, while to double the potassium in the same 
stratum would cost more than $1,000 an acre. 

Phosphorus can be purchased delivered at the farmer's railroad 
station in Illinois, for about 3 cents a pound in the form of fine- 
ground natural rock phosphate, for 10 to 12 cents a pound in steamed 
bone meal, or f or 1 2 to 1 5 cents in acid phosphate. It can be used with 
profit in any of these forms, but the data thus far secured in compara- 
tive experiments plainly indicate that, with equal amounts of money 
invested, the natural rock phosphate will give the greatest profit in 
rational permanent systems. At least 1,000 pounds per acre every 
four years should be applied, and for the first application even 3 or 4 
tons per acre is not considered too much phosphate by those who best 
understand the need and value of phosphorus on normal Illinois land. 

Nitrogen and organic matter. — There is a rather common opinion 
that the growing of clover enriches the soil in nitrogen, and many 
people even believe that clover in crop rotation will maintain the 
fertility of the soil. Such opinions are largely erroneous. The mere 
growing of clover on normal land does not enrich it. Even the 
nitrogen is not increased unless the clover crop is returned to the soil, 
either directly or in farm manure. Rotation with such crops as corn, 
oats, and clover depletes the soil of all important elements of fertility, 
and on normal soils always results ultimately in land ruin unless 
some system of restoration is practiced. Clover takes large amounts 
of calcium and phosphorus from the soil, and does not increase the 
nitrogen content if only the roots and stubble are left, because they 
contain no more nitrogen than the clover itself will take from soils of 
normal productive power. 

To increase or maintain the nitrogen and organic matter of the 
soil is the greatest practical problem in American agriculture. In an 
hour's time one can spread enough limestone or phosphate on an acre 
of land to provide for large crops of wheat, corn, oats, and clover for 
ten or twenty years, while to supply the nitrogen for the same length 
of time would require from 20 to 40 tons of clover or from 80 to 160 
tons of farm manure to be added to the same acre of land even though 
one of the four crops harvested secured its nitrogen from the air. 



LAND AND OTHER AGENTS OF PRODUCTION 161 

Certainly we are making no such additions to the soil in average 
Illinois agriculture, and one may well ask, How then is it possible to 
grow the crops now produced in this state ? In the simplest language 
the answer to this question is: By "skimming" the soil, by working 
the land for all that's in it, by following the example of our ancestors, 
who brought agricultural ruin to millions of acres of once fertile farm 
land in the original thirteen states. 

To provide nitrogen, I would suggest a five-field system — a 
four-year rotation of corn, corn, oats, and clover grown upon four 
fields for five years, while the fifth field is kept in alfalfa. At the end 
of the fifth year the alfalfa field is brought into the rotation and one 
of the other four fields seeded to alfalfa for another five-year period, 
and so on. If the yields are 50 bushels each of corn and oats, 2 tons 
of clover, and 3 tons of alfalfa; if the straw and half the cornstalks are 
used for bedding and all the other produce for feed ; and if 60 per cent 
of the nitrogen in the manure is used for the production of crops, then 
a system is provided which will permanently maintain the supply of 
nitrogen. This is for the live-stock farmer. 

For the farmer who sells grain and hay, a 2 5 -bushel wheat crop 
may well be substituted for the first corn crop, clover being seeded 
on the wheat for plowing under the next year before planting corn. 
If the fall and spring growths of this clover aggregate i| tons, and if 
only the grain and clover seed and the alfalfa hay are sold, all clover, 
stalks, and straw being returned to the land, this also provides a system 
for the permanent maintenance of nitrogen. 

These systems should be considered as only suggesting the basis 
for solving the nitrogen problem. The important point is that the 
landowner should know the essential facts and base his practice upon 
them in order to provide for permanent fertility with respect to the 
three elements, nitrogen, phosphorus, and limestone. 

45. PHYSICAL FACTORS DETERMINING THE AGRICULTURAL 
QUALITY OF LAND 1 

By EDWARD J. RUSSELL 

The complex that we speak of as the soil consists of four parts: 
1. The mineral matter derived from rock material, which con- 
stitutes the framework of the soil and is in the main unalterable, but 
it contains some reactive decomposition products. 

1 Adapted from Soil Conditions and Plant Growth (new edition), pp. 53-113, 
(Longmans, Green, & Co., London. Used by permission of the publishers^' 



1 62 AGRICULTURAL ECONOMICS 

2. The calcium carbonate and phosphate (the latter being usually 
in much smaller amounts), and organic matter derived from marine 
or other organisms deposited simultaneously with the soil. 

3. The soil water, a dilute solution of carbonic acid containing 
small quantities of any soluble soil constituent. 

4. The residues of plants that have grown since the soil occupied 
its present position, consisting of the mineral plant food taken up 
from the soil water and of part of the complex organic matter. As 
the source of energy this may be regarded as the distinguishing char- 
acteristic of soils. 

By the method of mechanical analysis the particles of soil can be 
sorted out into fractions, each falling within certain specified limits 
of diameter; those adopted in Great Britain are as follows: 

Fine gravel Above 1 mm. in diameter 

Coarse sand 1 to o. 2 mm. 

Fine sand o. 2 to o. 04 mm. " 

Silt 0.04 to o. 01 mm. " 

Fine silt 0.01 to 0.002 mm. " 

Clay Below o. 002 mm. " 

So far as is known, all coarser particles are chemically inert. The 
clay fraction, on the other hand, stands out in sharp contrast, both in 
composition and in chemical and physical properties. 

The clay fraction. — Clay may be regarded as a plastic colloid, but 
its special properties are seen only when a certain amount of water 
is present. If it is well rubbed with water it becomes very sticky and 
absolutely impervious to air or water; it is also highly plastic. It 
shrinks very much on drying and absorbs heat; on moistening again, 
however, there is a considerable swelling and evolution of heat. The 
separate particles of clay are so small that, when placed in water, they 
sink only very slowly, in spite of their high specific gravity. Small 
quantities of acids or salts cause the temporary loss of plasticity, 
impermeability, and the property of remaining long suspended in 
water without settling; the clay is now said to be flocculated. The 
change can be watched if a small quantity of any flocculating sub- 
stance is added to the turbid liquid obtained by shaking clay with 
water; the minute particles are then seen to unite to larger aggregates, 
which settle, leaving the liquid clear. There is, however, no per- 
manent change; deflocculation takes place and the original properties 
return as soon as the flocculating agent is washed away. Alkalies 



LAND AND OTHER AGENTS OF PRODUCTION 163 

(caustic soda, caustic potash, ammonia, and their carbonates) defloc- 
culate clay, causing it to remain suspended in water for long periods. 

These clay properties are of great importance to the fertility of 
the soil, and no constituent is more necessary in proper proportions, 
or more harmful in excess. Clay impedes the movement of water in 
the soil and keeps it in the surface layers within reach of the plant 
roots. Excess of clay, however, interferes too much with the water 
movements; it also impedes the movement of air to the roots and 
lowers the temperature of the soil. The adhesive properties of clay 
cause the soil particles to bind together into those aggregates on 
which "tilth" depends; soil without clay would be very like a sand 
heap. Here also, however, excess of clay does harm and makes the 
soil so adhesive that it sticks to the tillage implements and retards 
their movements; it also tends to form large clods unfavorable to 
vegetation and to make the soil shrink very much on drying, so that 
large cracks appear in the fields in summertime. These harmful 
effects are reduced by flocculation effected by dressings of lime or 
chalk and by organic matter; on the other hand, they are intensified 
by the deflocculation resulting from the use of alkaline manures. 
Further, clay "fixes" and retains the ammonia and potash supplied 
as manure. 

Fine silt has also great water-holding powers, and in excessive 
amounts (above 10 to 15 per cent) it increases the difficulty of working 
the soil, especially if much clay is present. It does not possess the 
marked plastic and colloidal properties of clay and is less altered by 
lime; indeed, no method is known for making it tractable. The 
coarser grade of silt appears to be very valuable, and constitutes 
30 to 40 per cent of many of the loams most famous in the southeast 
of England for carrying their crops well and not drying out. Prob- 
ably silt plays a very important part in maintaining the even condi- 
tions of moisture so desirable for plant growth. It is fine enough to 
retard, but not to prevent, percolation, and it facilitates capillary 
movement of water. 

Fine sand forms a considerable fraction — usually 10 to 30 per cent 
or more — of nearly all soils. Although its dimensions are relatively 
large, it still possesses cohesiveness and a tendency to cake together; 
it has not, however, so great an effect as silt in maintaining a good 
moist condition. Soils containing 40 per cent or more of fine sand 
tend to form, af^er rain, a hard crust on the surface, through which 
young plants can make their way only with difficulty until it has boon 



1 64 AGRICULTURAL ECONOMICS 

broken by a roller. But they have no great water-holding capacity 
or retentive power, and are not infrequently described by their cul- 
tivators as hungry soils that cannot stand drought. 

Coarse sand is perhaps the most variable of all soil constituents 
in amount, and, as its properties are in many ways the reverse of those 
of clay, it exercises a very great effect in determining soil fertility. 
Through its lack of cohesion it keeps the soil open and friable; in 
moderate amounts it facilitates working, but in excess it increases 
drainage and evaporation so much as to interfere seriously with the 
water-holding capacity of the soil. Many good loams contain less 
than 4 per cent and, in general, strong or tenacious soils contain less 
coarse sand than one-half the quantity of clay present. As the 
amount of coarse sand increases, the soils become less and less suited 
to cultivation, till finally the sand-dune condition is reached. 

Fine gravel is not usually present to any great extent, and is of 
importance only when the coarse sand is already dangerously high. 
Stones, if uniformly scattered through a stiff soil, are on the whole 
beneficial, because they facilitate tillage. Where they form a bed 
underlying the soil they may do harm by causing over drainage. 

Calcium carbonate. — Calcium carbonate is often present in small 
amounts only, but it plays a controlling part in soil fertility. It pro- 
duces physical as well as chemical effects; it gives rise to the soluble 
bicarbonate that flocculates clay, and thus physically improves the 
soil texture. Two soils similar in constitution and general external 
conditions, temperature, water supply, etc., have very different agri- 
cultural value because of their different content of calcium carbonate, 
one being readily cultivated while the other is wet and sticky and 
suitable only to pasture land. 

The soil water. — The soil retains by absorption and surface attrac- 
tions some 10 to 20 per cent of its weight of water, distributed as films 
over its particles. The rain water falling on the soil immediately 
begins to soak in, but during its passage a certain amount is retained 
on the surface of the particles and never drains away; it forms a 
series of continuous films exhibiting all the special properties asso- 
ciated with the surfaces of liquids. Thus, the water remains on the 
particles against the force of gravity. Further, it tends to distribute 
itself evenly throughout a uniform mass of soil by moving from places 
where the curvature of the films is flat to places where the curvature is 
sharp. Evaporation is continually reducing the thickness of the films, 
and finally breaks them altogether, so that the soil becomes dry. 



LAND AND OTHER AGENTS OF PRODUCTION 165 

The moisture content of a soil is a function of its structure. A 
sandy soil soon becomes wet, but dries again rapidly. Its large pores 
allow rapid percolation of the free water; its relatively small total 
surface (a consequence of the large size of its particles) holds a pro- 
portionately small amount of water; it possesses but little colloidal 
material to absorb and retain water. Addition of easily decomposable 
organic matter increases the amount of colloid and thus increases the 
water-holding capacity; addition of clay increases the colloids and 
the total surface, and also partially blocks up the pores, the last two 
effects being due to the smallness of the clay particles. Under equal 
conditions of water supply, clay soils and soils rich in organic matter 
are, therefore, much moister than sandy soils.. 

The whole of the soil water is not generally available for any one 
plant. Water must be supplied to the plant at least as quickly as it 
is lost by transpiration; otherwise, wilting sets in. Now the rate of 
supply of soil water is simply the speed at which water can move in 
the soil, and this depends on the amounts of clay and colloidal matter 
present; it may easily fall below what is wanted for maintaining 
equilibrium in the plants growing on soils rich' in clay or organic 
matter. Wilting is so difficult to characterize, and is affected by so 
many external circumstances, that in any case it affords only a rough 
method of studying the "availability" of the soil water for the plant. 

Organic matter. — The distinguishing characteristic of soil is that 
it contains part of the complex material synthesized by plants. This 
material affords energy to numerous micro-organisms, and is gradually 
converted by them into simple substances appropriate for plant 
nutrition. In addition, it has important physical effects on the soil. 
Two great groups are to be carefully distinguished : one furnished by 
recent generations of plants, the other deposited with soil during its 
formation and therefore as old as the soil itself. The organic matter 
furnished by recent vegetation may roughly be classified as: (1) mate- 
rial that has not yet had time to decompose and still retains its 
definite cell structure; (2) partially decomposed and still decomposing 
material; (3) simple soluble decomposition products; (4) plant or 
animal constituents not decomposable in the soil. 

The partially decomposed material forms a particularly vague 
and indefinite group, but one extremely important to plant growth. 
This group possesses at least six properties not shown by the un- 
decomposed plant residues: 

1. It gives a dark brown or black color to the soil. 



166 AGRICULTURAL ECONOMICS 

2. It can withdraw various ions — NH 4 , K, P0 4 — from their solu- 
tions. 

3. It causes the soil to puff up or " ferment," and so leads to an 
increase in the pore space and a marked improvement in the tilth and 
general mechanical condition. 

4. It increases the water-holding capacity of the soil. 

5. It swells when wetted. 

6. Although the group is essentially transitional, it has a certain 
degree of permanency and only slowly disappears from the soil. 

The group of substances possessing these properties is generally 
called "humus," and so long as the word is used in a collective sense 
as a convenient label it may be retained. But the practice has been 
responsible for a good deal of loose thinking, because it obscures the 
fact that the group is an indefinite and complex mixture, and gives 
instead the impression that it is a single definite substance. 

The constitution of the soil. — The components of the soil do not 
form a mere casual mixture. A much more intimate mingling prevails, 
amounting almost to a loose state of combination. It is unfortunate 
that so little is known about the compound particles, because they 
play a great part in determining the relationships between soil and 
plant growth. They can be disintegrated by various cultivation 
methods, such as plowing the soil when wet, or by allowing the stock 
of organic matter and calcium carbonate to fall too low, and when 
this has happened the "clay" properties become emphasized, so that 
the soil loses its fine, crumbly state and is very apt to become sticky 
when wet, and to dry into a hard cake through which young plants 
can force their way only with difficulty. The compound particles 
can be re-formed by careful cultivation and by adequate additions 
of organic matter and calcium carbonate, but the process may take 
years, nor can it be hastened until it is better understood. 

The reader cannot fail to have noticed how many of the important 
soil properties are due to colloids. The formation of these compound 
particles, the absorption of soluble manures, the retention of water 
(in part), the swelling of the soil when wet and its shrinkage when 
dry, are all colloidal phenomena. If we regard the mineral particles 
as the skeleton of the soil, we must look upon the colloids as clothing 
it in many of its essential attributes. 

Air supply and temperature of the soil. — The percentage of the 
volume of a soil which is occupied by air is perpetually varying 
inversely as the amount of water varies. While the yield of a crop 



LAND AND OTHER AGENTS OF PRODUCTION 167 

normally rises as the water increases up to a certain point, it then 
falls off, because the excess of water reduces the air supply for the 
roots. Changes in the amount of water in the soil would alone lead 
to a renewal of the air supply in the soil, but other factors — diffusion, 
changes in pressure, air movements, etc. — come in, making the gaseous 
interchange still more complete. 

The temperature of the surface layer of soil, which in turn deter- 
mines the temperatures of the lower layers, is the resultant of several 
different effects. The actual amount of heat reaching the surface is 
that portion of the sun's rays that passes unabsorbed through the 
atmosphere, and is therefore dependent on the climate. The inten- 
sity of distribution of the heat over the surface depends on the slope 
of the land, and is greater the more nearly the land lies at right angles 
to the midday rays: thus, in our latitudes a south slope is warmer 
than a north slope,, so much as often to produce marked vegetation 
differences. Many of the rays may be intercepted by vegetation; 
consequently land densely covered by plants is cooler and moister 
than bare land. Of the rays that do finally reach the surface not all 
are absorbed, an unknown fraction being reflected back again into 
space. Although no actual measurements have been made, the loss 
from this cause is probably greater on a white chalky soil than on 
a black humous soil. 

The extent to which a given quantity of absorbed heat raises the 
temperature of a soil depends on its specific heat, and this again on 
its water content. A dry soil will attain a higher temperature than 
a moist one. It commonly happens that the surface layer of the soil 
is hotter than the air, especially on a sunny day. The passage of 
heat through the soil is slow and consequently fluctuations in tem- 
perature at a depth of 3 inches are less marked than at the surface, 
especially in dry, loose soils. The thermal conductivity of a soil is 
increased by moistening and by compacting. 

46. BACTERIA AND SOIL FERTILITY 1 
By P. E. BROWN 

The factors which bring about the change of insoluble substances 
into soluble in the soil may be grouped into three classes — physical, 
chemical, and bacteriological. The bacteriological factors have come 

1 Adapted from "Bacteria and Soil Fertility," Circular Xo. 7, Agricultural 
Experiment Station of Iowa State College, pp. 3-15. 



168 AGRICULTURAL ECONOMICS 

into prominence only quite recently, but now they are recognized to 
be of as much, if not more, importance than the other two groups. 

All bacteria may be included in one of two large classes, depending 
on their functions or the character of their activities. These are the 
parasites and the saphrophytes. The saphrophytes are the decay- 
producers. These saphrophytic, or decay, bacteria are invaluable. 
They have been called the "link between the world of the living and 
the dead." They transform dead materials back into living matter 
and thus complete the cycles through which, in nature, all substances 
must go. 

Enormous numbers of bacteria inhabit the soil, some of them 
harmful, but the vast majority beneficial. Actual counts have shown 
that the numbers present in soils may vary from a few thousand per 
gram (about one- thirtieth of an ounce) to over fifty million per gram. 
The growth of bacteria in the soil is greatly influenced by certain 
chemical and physical conditions. Thus, a proper amount of water 
in the soil is as necessary for the growth of bacteria as for crops. 
Either excessive moisture or severe drought interferes with bacterial 
growth very considerably. Temperature conditions are also impor- 
tant. Every organism grows best at a certain temperature, which is 
called its optimum temperature. The optimum for most soil organ- 
isms ranges from 65 to 90 F., although of course there are exceptions 
to this statement. 

In general it may be said that the beneficial bacteria in the soil 
need air. Hence in heavy clay soils, where there is not enough air, 
methods which increase the circulation of oxygen in the soil increase 
bacterial activity; these increase the solution of plant food, and this 
ultimately increases crop production. On the other hand, if there is 
too much air present, as in light sandy soils, the bacterial activities 
will be too great and the humus will be burned up too rapidly, plant 
food will be produced in too large quantities to be utilized by the 
crops, and more or less extensive losses of valuable soil elements will 
occur. 

The reaction of a soil (i.e., its relative acidity or alkalinity) means 
much from a bacterial standpoint. Soils which have become acid or 
sour are notably unproductive and this is largely due to the fact that 
the growth of beneficial bacteria in such soils is checked. 

Lastly, bacteria require food for growth just as truly as do crops, 
and it is because of this need that they influence fertility. In the 
process of taking up food from the chemical compounds in the soil, 



LAND AND OTHER AGENTS OF PRODUCTION 169 

the bacteria cause changes in the compounds, making them soluble 
and hence available for the growth of plants. Most soil bacteria live 
principally on organic matter, or humus, and the products of their 
own activity. Up to a certain limit, increasing the humus content 
may, therefore, be expected to increase the bacterial life. The bac- 
teria, furthermore, not only act on the humus or organic matter in 
the soil and bring about its solution in the process of obtaining their 
food, but they also attack the mineral portion of the soil and change 
insoluble portions of that into soluble. 

The nitrogen problem and its solution. — Soils are very apt to be 
deficient in nitrogen. This element, then, is generally the limiting 
factor in the growth of crops. Formerly the lack of nitrogen in a 
soil was supplied by application of nitrate of soda, which was obtained 
from the nitrate beds in Chile. With the increasing demands for 
nitrates, the amounts taken yearly from the nitrate beds were enor- 
mous, and it was estimated that in a very short time the deposits would 
be exhausted and the world would face a nitrogen famine. Of course, 
other nitrogenous materials were available for manure, but in such 
small amounts that they would be merely a drop in the bucket in sup- 
plying the demands of the world. 

It was just at this crucial time that soil bacteriologists came to 
the rescue and quieted the general fears by showing that certain 
species of bacteria living in soils have the ability to draw upon the 
inexhaustible supply of nitrogen in the air (which contains 79 per cent 
nitrogen) and fix it in the soil in a form available for plants. Thus 
the nitrogen problem was solved and there need be no fear of a nitro- 
gen famine. 

There are two classes of bacteria which are thus able to utilize 
the nitrogen of the air in their growth: first, those which live entirely 
dependent on their own resources, and second, those which grow on 
the roots of legumes, such as clover, alfalfa, etc. The first are said 
to live non-symbiotically, or independently, and are 'known as non- 
symbiotic; the second are said to live in symbiosis with the legumes, 
or in a state of mutual helpfulness, and are called symbiotic. 

The first group of nitrogen fixers, or azotobacter, as they are 
called, are present in most soils. These bacteria fix nitrogen in 
amounts which have been estimated at from 15 to 40 pounds per 
acre per year under ordinary conditions. Proper farm management 
includes many practices which encourage the fixation of nitrogen from 
the atmosphere. Thus the ordinary operations of tillage, which open 



170 AGRICULTURAL ECONOMICS 

up the soil and admit of a free circulation of air, encourage the growth 
of the free-living bacteria and bring about greater fixation of nitrogen 
from the atmosphere. So, also, liming as a remedy for acidity increases 
the amount of nitrogen in the soil by causing a greater growth of 
azotobacter. 

The beneficial effect of clover growing on soils was known many 
years before it was satisfactorily explained. The mystery was not 
cleared up until the bacteriologists found that certain bacteria were 
associated with legumes and that these bacteria took nitrogen from 
the air and fixed it in the soil. 

Legumes will grow and flourish on soils that have absolutely no 
nitrogen if the proper bacteria are present and the legumes become 
inoculated with these bacteria. In this process of inoculation the 
bacteria enter the roots of the legumes. The plants aid the process 
by a softening of their tissue, and then in so-called " infection-threads" 
the bacteria pass from cell to cell. They gather at a particular spot 
and, nourished by the plant, multiply to a large extent and form what 
are known as nodules, or swellings on the roots. As soon as the 
organisms begin to multiply they begin to take nitrogen from the at- 
mosphere and to supply it to the plant. The plant in Teturn sup- 
plies the bacteria with the necessary carbonaceous food and a close 
union for mutual benefit is thereby established. So the legumes draw 
but a small proportion of their nitrogen from the soil, and if the entire 
crop is turned under for a green manure, which is a common practice, 
there is a large gain to the soil in nitrogen. 

Legumes will often grow without inoculation and in soils very rich 
in nitrogen will yield good crops. They then draw their entire nourish- 
ment from the soil. When that is the case the legumes have no 
advantage over the non-leguminous crop. But when legumes are 
inoculated they contain a larger percentage of nitrogen and the soil 
is not robbed of its stock of nitrogen. 

The activities of soil bacteria with regard to the nitrogen problem 
are important, not only from the standpoint of increasing the nitrogen 
content of soils through additions from the atmosphere, but also in 
the change of organic materials into available forms. Plant and 
animal remains in the soil, farmyard manure, green manures, or other 
organic materials, added to the soil contain insoluble organic nitroge- 
nous matter known as protein, and these must be changed into sol- 
uble nitrates to be of use to plants. This solution is accomplished 
by the process of decay. Bacteria are the active agents bringing 



LAND AND OTHER AGENTS OF PRODUCTION 171 

\ 
about this decay in the soil. Various groups of universally distributed 
organisms are involved. In the first place, the insoluble proteins are 
changed into soluble peptones; these are changed into amino acids, 
and these in turn to ammonia. This ammonification constitutes a 
vital stage in the production of nitrates in the soil. It is important 
also in that it brings about the formation and later the destruction 
of humus. 

Humus is decaying organic matter in the soil. We know that the 
presence of a proper amount of humus and also the best rate of 
destruction are important factors from the physical and chemical 
standpoint in determining the fertility of a soil. Introduction of 
barnyard manure brings about vastly increased bacterial action, due 
to the large amount of organic matter added and also the large number 
of bacteria introduced. Thus the ammonifying power of a soil is 
increased by addition of manure. 

Ammonium compounds produced in the soil as just described 
never accumulate to any appreciable extent, but are transformed into 
nitrates almost as rapidly as they are formed. This transformation 
is called nitrification and includes two stages : the change of ammonia 
to nitrites and then the oxidation of nitrites to nitrates. Two distinct 
classes of organisms are involved in the process and they are both of 
practically universal distribution. 

All the farming operations which increase ammonification have 
a similar effect on nitrification, since nitrification starts where ammo- 
nification leaves off. Particularly necessary for nitrification, however, 
is the presence of lime in soils. This is due to the fact that nitrous 
and nitric acids are produced in the process of nitrification and if they 
are not neutralized by lime they accumulate and very quickly stop 
bacterial action. The activities of both the ammonifying and the 
nitrifying bacteria are governed very closely by the climatic and 
farming conditions with regard to moisture, temperature, acidity, 
aeration, and food supply. 

Bacteria and minerals in the soil. — In the process of decay of which 
we have spoken, the destruction of the organic nitrogenous materials 
leads to the production of other compounds than ammonia and 
nitrates. Chief among these is carbon dioxide. Furthermore, the 
organic non-nitrogenous substances', such as starches, sugars, cellulose, 
etc., are destroyed in the general decay which occurs in the organic 
matter, and among the variety of products which result we find various 
organic acids and particularly carbon dioxide. These organic acids and 



172 AGRICULTURAL ECONOMICS 

the carbon dioxide have the power of attacking insoluble mineral com- 
pounds in the soil and transforming them into soluble forms, available 
for plant food. Thus insoluble phosphates and potash compounds 
are acted upon and changed into soluble forms by the soil water carry- 
ing the carbon dioxide and organic acids in solution. Again we see 
that bacterial activities bring about the preparation of plant food. 

The demands of various crops for sulphur has been the subject of 
recent investigations and it has been estimated that the supply of 
sulphates in the soil may be insufficient in many cases for the proper 
feeding of certain crops. A group of organisms occurring in the soil 
and known as the sulphur bacteria come into prominence here as the 
agency keeping up the proper supply of sulphates. When proteins 
decay, hydrogen sulphide gas is set free. This is taken up by the 
sulphur bacteria and oxidized to free sulphur, which is in turn oxidized 
to sulphates. Increased decay therefore leads to increased hydrogen 
sulphide and this in turn to increased sulphates for plant food. 

We may conclude, therefore, that all methods which increase the 
activities of the decay bacteria lead directly to an increased supply 
of available nitrogen, and indirectly to larger amounts of phosphorus, 
potassium, and sulphur becoming available for plant food. 

In short, the relation between bacteria and soil fertility is very 
close and very vital, and systems of permanent agriculture must rest 
firmly on a bacteriological basis to be of any value. If chemical 
analyses have shown sufficient amounts of the necessary mineral 
plant food constituents, the bacteria under the optimum conditions 
which can be maintained by any intelligent farmer will transform it 
into an available form to satisfy the needs of the growing crops. 

47. THE REAL MEANING OF SOIL FERTILITY AND SOIL 
EXHAUSTION 1 

By EDWARD J. RUSSELL 

Fertility is not an absolute property of soils, but has meaning only 
in relation to particular plants. Plant requirements vary; a soil may 
be fertile for one plant and not for another; every soil might con- 
ceivably prove fertile for something. But in practice the agriculturist 
can find use for only a very limited number of plants; he therefore 
has to select those combining the double features of salability in his 

1 From Soil Conditions and Plant Growth (new edition), pp. 150-52. (Long- 
mans, Green, & Co., London. Used by permission of the publishers.) 



LAND AND OTHER AGENTS OF PRODUCTION 173 

markets and suitability to his conditions of soil and climate. To a 
certain extent it is possible to bridge the gap between plant require- 
ments and soil conditions; the former may be permanently altered 
by breeding if suitable plants cannot be found by selection, and the 
latter may be changed by such processes as draining, liming, etc. 
When all has been done that is economically possible there may still 
remain a divergency between the conditions ideal for the plant and 
those it finds in the soil; this divergency is the measure of the infer- 
tility of the soil for the crop. 

The problem has to be simplified by restricting attention to the 
common agriculture crops and interpreting fertility to mean the 
capacity for producing heavy crops regardless of any subtle distinc- 
tions of quality. Three factors then come into play: an adequate 
supply of air and water to the roots, a sufficiently rapid production 
or solution of food material, and absence of harmful agencies. We 
have seen that the compound particles can be altered considerably by 
human efforts, within the limits fixed by the properties of the unalter- 
able ultimate particles. In trying to improve the soil, therefore, four 
courses are open: 

1. The water supply may be increased by deepening the soil, e.g., 
by breaking a "pan," by enriching the lower spit, or other device, 
while the air supply can be increased by drainage. 

2. The compound particles may be built up by proper cultivation 
and the addition of organic matter (e.g., dung, green manuring, etc.) 
and of calcium carbonate. 

3. Sufficient calcium carbonate must be added for the needs of 
the crop and the micro-organisms; nothing but a field trial can deter- 
mine what this is. 

4. The food supply can be increased by the addition of fer- 
tilizers, the plowing-in of green leguminous crops, feeding cake on 
the land, etc. 

Conversely, the "exhaustion" of soil is limited in our climate 
(England) to the removal of organic matter, calcium carbonate, and 
some of the food (often the nitrogen compounds), and the desirable 
compound particles; the ultimate particles, and all the possibilities 
they stand for, remain untouched. A distinction is therefore made 
between the temporary fertility or "condition" within the cultivator's 
control and the "inherent" fertility that depends on the unalterable 
ultimate particles. Of course the distinction is very indefinite and, 
in practice, wholly empirical, no proper method of estimation having 



174 AGRICULTURAL ECONOMICS 

yet been worked out, but it is of importance in compensation and 
valuation cases. 

Serious soil exhaustion did not arise under the old agricultural 
conditions where people practically lived on the land and no great 
amount of material had to be sold away from the land. Phosphate 
exhaustion was the most serious occurrence, and as the original supplies 
were not as a rule very great, it must have been acute by the end of 
the eighteenth century in England, where remarkable improvements 
were, and still are, effected all over the country by adding phosphates. 
The crowding of the population into cities, and the enormous cheap- 
ening of transport rates, led during the nineteenth century to the 
adoption in new countries, particularly in North America, of what 
is perhaps the most wasteful method of farming known — continuous 
arable cultivation without periodical spells of leguminous and grass 
crops. The organic matter was rapidly oxidized away, leaching and 
erosion increased considerably when the cover of vegetation was 
removed, while the compound particles that had slowly been forming 
through the ages soon broke down. Nothing was returned to the soil, 
the grains and other portable products were sold and the straw burnt- 
The result has been a rate of exhaustion unparalleled in older coun- 
tries, and wholly beyond the farmer's power to remedy; consequently 
he left the land and moved on. The excellent experimental studies 
of Hopkins at the Illinois Experiment Station, of Whitson at Wis- 
consin, and other American investigators have shown that additions 
of lime, of phosphates, and sometimes of potassium salts, with the 
introduction of rotations, including grass and leguminous crops, 
and proper cultivation, will slowly bring about a very marked 
improvement. 

D. Topographical Limitations to Agriculture 

48. SOIL EROSION 1 
By R. O. E. DAVIS 

Destruction of the natural growth and clean cultivation on hilly 
land, without protection against erosion, results in the removal of the 
soil material by water more rapidly than it is formed and in a very 

1 Adapted from "Soil Erosion in the South," Bulletin 180, United States 
Department of Agriculture, pp. 9-23. Part of the first paragraph is borrowed from 
an article by the same author in Yearbook of the Department of Agriculture, 1913, 
p. 208. 



LAND AND OTHER AGENTS OF PRODUCTION 175 

irregular manner. Hillside erosion is not a simple process, for in it 
are involved the relation of the velocity of moving water to the slope 
of the soil, the amount of organic matter incorporated in the soil, the 
vegetal covering, the mechanical composition of the soil, and the rate 
at which water is supplied to the surface. In addition to the surface 
conditions of the soil, the character of the subsoil has a profound effect 
upon the tendency to erode. The fact that a soil is or is not covered 
with forest or grass, or contains much organic matter, or is clayey or 
sandy, influences the rate at which it absorbs water and the amount 
of erosion caused by the surface run-off of the water. 

The erosion of the soil occurs mainly in two ways, which are 
markedly different: (1) as sheet erosion and (2) as the gully type of 
erosion. In sheet erosion the water falling on the surface of the soil 
carries off with it a small amount of soil material from every part of 
the field. In advanced stages there appear incipient gullies, parallel 
to each other, known as shoestring gullies. This type of erosion is 
not so destructive of the field on which it occurs as the gully type, for 
the removal is more uniform, and if a field is continually cultivated 
the physical evidence of erosion may be slight. The second type of 
erosion, or the gullying, develops where, owing to the occurrence of 
natural depressions, the water runs off in the form of streams. These 
cut into the soil and soon develop gulches of great depth with nearly 
vertical sides, which grow in length, breadth, and depth with every 
rain. This type of erosion is the most difficult to check, and renders 
the land on which it occurs practically valueless. 

Excessive erosion results in a change in the physical condition of 
the soil. The bodily removal of soil particles takes place from the 
surface; there is a sorting of the soil particles, the larger and heavier 
being deposited first and the smallest last. The result is an impaired 
physical condition of the soil wherever this sorting action is taking 
place. Soils composed almost entirely of either sand or clay particles 
are not so good as those with a fair amount of each. 

The quality of the soil is greatly impaired by the continual process 
of erosion. Rapid leaching takes place, removing a large part of the 
soluble salts; the surface soil is often washed down to the lowlands 
and sometimes out to the sea; gullying so defaces the land that it 
becomes difficult to cultivate. The organic matter is one of the first 
losses of eroded soils. Abandonment of the field follows, because the 
land is considered too poor for agricultural use, having lost its pro- 
ductiveness through the process of erosion. 



176 AGRICULTURAL ECONOMICS 

The gullies in the field act as drainage ditches. The land between 
such gullies drains too rapidly, the water-table is lowered, and it is 
difficult for the crop to obtain sufficient water for proper growth or 
to withstand even a moderate period of drought. As these gullies 
occur on hillsides, the natural drainage is ample, if not excessive, so 
that the additional drainage furnished by the gullies is a positive 
disadvantage. 

This removal of the best soil material and the impairment of that 
remaining results in the occurrence of much waste land. In the South 
the abandonment of land is traceable more often to erosion than to 
any other cause. In some of the states vast areas, amounting occa- 
sionally to 50 per cent of the arable land of those sections, have been 
abandoned to the ravages of water-wash. 

Throughout the South erosion is probably worse than in other 
sections of the country. In the Atlantic Coast states the worst type 
is encountered in the Piedmont section. It is less marked in the 
mountains, probably because agriculture is less extensively practiced. 
Erosion is very marked in some of the states of the Mississippi Valley, 
some of the worst eroded sections of the country occurring in the hills 
of these states. 

The erosion in the Piedmont province is apparently more pro- 
nounced in the more southerly states. This is probably due largely 
to the climatic conditions. During the winter the temperature is not 
low enough to cause deep freezing, and cold periods are of short dura- 
tion. The soil is not protected from the action of winter rains like 
the soil of more northerly climates, where the soil is frozen during 
practically the entire winter, so that the rain cannot remove the soil 
mantle. In addition, the precipitation in more northerly regions is 
largely in the form of snow, which melts gradually in the spring and 
is absorbed by the soil instead of running off over the surface. 

One of the peculiar soil conditions encountered in many sections 
and most conducive to destructive erosion is a surface layer of heavy 
soil material, varying from 6 inches to several feet in thickness, under- 
lain by sandy material. Erosion on this type of soil produces enor- 
mous gulches, 10-50 feet deep and several hundred feet wide, 
sometimes extending for 1 or 2 miles. They begin in the hills ad- 
joining the low lands, and by constant undercutting and caving push 
far back into the hills. They are very difficult to stop and often work 
their way across roadways, farms, forests, and even building sites. 
It is problematical whether the progress of these gulches can be en- 



LAND AND OTHER AGENTS OF PRODUCTION 177 

tirely checked in any profitable way. However, it may be greatly 
retarded by continually dumping debris, brush, or other material 
into the gully, by planting wild honeysuckle around the head and 
sides and young pines or other trees in the mouth. 

The main problem is to arouse the farmers to a realization of the 
importance of treating their soil in the manner best suited to its con- 
dition. Soils that cannot be cultivated without danger of erosion 
should be used for the production of hay, for pasture, or for forestry, 
either of which may pay better under the circumstances than the 
crops obtained from clean cultivation. The greatest damage from 
erosion generally occurs where the original growth has been removed 
and the land is being used for crop production. This most frequently 
means clean culture. The agricultural conditions in the South are 
especially favorable for erosion, as the main crop is cotton, which 
requires entire freedom from grasses and weeds. It often happens 
that the same land is cropped year after year to cotton, until the soil 
becomes so unproductive that its cultivation is not profitable, and is 
allowed to "lie out" and become infested with weeds. It is then that 
erosion is most destructive. The soil is exhausted of organic matter, 
and even before the weeds begin to grow the rains form gullies over 
the surface. Probably the field will not be put under cultivation 
again, and in a few years it becomes devastated, without agricultural 
value, and a menace to the surrounding land. 

The reclamation of eroded land is possible, but requires atten- 
tion and patience. The use of such land for forestry is commonly 
advisable. 

49. GRAZING WHERE TILLAGE IS IMPRACTICABLE 1 
By JAMES STEPHENSON, JR. 

The grazing lands of the state of Idaho constitute by far the largest 
portion of its area. A very large portion of the acreage classified as 
timbered is also grazing land and is occupied as a summer range by 
sheep and cattle. There are wide areas in the northern section of the 
state that are covered with rough hills and mountains, the south sides 
of which are valuable grazing land and the north sides heavily tim- 
bered. It is therefore safe to say that Idaho contains 30,000,000 acres 
of grazing land. A large portion of the land of the southern district 

1 Adapted from Bulletin 216, Office of Experiment Stations, United States 
Department of Agriculture, p. 24. 



178 AGRICULTURAL ECONOMICS 

is suitable for winter grazing only, being largely covered with a heavy 
growth of sagebrush and dry-land grasses, but without a supply of 
water for stock during the summer months. The melting snows and 
spring rains supply the needed moisture to produce a good growth of 
grass over all of this region, but the lack of water for stock saves the 
grass and forage until the snowfall of winter provides the needed 
moisture for cattle and sheep, and the grass then provides the winter 
feed for thousands of animals. During the summer months stock of 
all kinds seek the green grass and pure spring water of the high 
mountain ranges with which the state is so liberally provided. Grass 
and forage in the mountains, when the snowfall is deep, grow rapidly 
and provide great quantities of feed year after year on the same range. 

Note. — This is merely a typical bit of what is true over consider- 
able areas in our highland regions, both east and west. New England 
land that was too rough for the plow reverted to sheep pastures and 
horse farms as soon as the competition of western lands became active. 
Similarly, New York has become our leading dairy state, and from the 
Adirondacks south to Alabama the rough lands of the Appalachian 
region are destined apparently to produce, at least for a long time to 
come, only such product as can be secured from pastoral farming. Of 
course, in many places orcharding competes with or supplements 
stock raising and, as population becomes more dense, there is a strong 
tendency to introduce more intensive types of farming on the small 
plateaus or in even the tiniest of level valleys. There is also the 
tendency to carry agriculture farther by resorting to terracing as a 
means of extending permanent cultivation to the less level lands. 
Among the teeming population of the Orient this effort is carried to 
the extreme, and terraced hillsides whose natural slope is nearly or 
quite forty-five degrees are cultivated in narrow strips by hand labor. 
Travelers report that some of the rice-paddies are but a few feet in 
diameter. 

An interesting phase of pastoral farming in a mountainous region 
is to be seen in Switzerland. The peasants maintain their permanent 
homes in the valleys, where they stable and feed their stock through 
the winter, often combining some light form of household manufac- 
tures with their other tasks during the indoor season. With the 
advent of spring, flocks and herds are driven into the foothills or 
V or alp, and after a few weeks up to the Hochalp, as far as the margin 
of perpetual snow. From this summer grazing they return to the 
Voralp for a few weeks in the fall and then are driven down to the 
valleys for winter housing. 



LAND AND OTHER AGENTS OF PRODUCTION 179 

It is evident that an additional reason why cattle or sheep raising 
is peculiarly suited to hilly regions is due to the fact that the product 
may be driven to market or the output reduced to a compact form, 
such as cheese or butter, which is easily transported. Other and more 
intensive ways of utilizing such mountain or piedmont lands are pre- 
cluded by the difficulties which such regions present to the extension 
of good roads, railways, or other means of communication. The 
Cumberland Plateau furnishes a striking illustration of this point. — 
Editor. 

50. TREE CROPS FOR THE HILL LANDS 1 
By J. RUSSELL SMITH 

As a consequence of rocks and hills, large areas of the United 
States are utterly unplowable and practically useless, except for 
forest possibilities. Other large areas are of low fertility, low pro- 
ductivity, and difficult to work because they are hilly and somewhat 
stony, and have therefore been run down and robbed. We have not 
yet learned how to unlock one-half our agricultural resources. Agri- 
culture depends upon plants, and plants depend upon heat, light, fer- 
tility, and moisture. Now we have added to those four the purely 
unnatural and complicating fifth qualification — suitability of the land 
to be plowed and to stand continued plowing. Let us keep the plow, 
but cease to depend upon it so completely. 

There stands abandoned New England, a chaos of stones, rocks, 
hills, an unending amazement to the natives of the good agricultural 
districts of America. "How," these people are continually saying, 
"how in the world did the Yankees of past generations ever wring a 
living from among those rocks ? " As long as agriculture was a matter 
of plowing, it is no wonder that the New Englanders fled the land until 
farms by thousands were gladly to be given away if you would only 
pay a fraction of the value of the buildings. Shall the American people 
be baffled merely because we cannot plow the land when it has all the 
other qualifications — heat, light, moisture, and fertility ? 

There are Spanish acorns two inches long and, except for some 
shortage of protein, surprisingly close to white bread in food content. 
In Spain thousands of acres are given over to acorn orchards which 
fatten tens of thousands of Iberian hogs without the intervention of 
the labor of man in harvesting. The crop of the chestnut orchards 
which occupy the steep, rocky, untillable mountainsides of Italy is 

x Adapted from "The Agriculture of the Future," Harpers Magazine, January, 
19 13, pp. 273-80. 



180 AGRICULTURAL ECONOMICS 

the bread supply and the money crop of thousands of mountain- 
dwellers. Over some hundreds of thousands of square miles of terri- 
tory below Mason and Dixon's line the 'possum waxes fat on the 
toothsome, nutritious fruit of the persimmon tree. In Japan and 
China the persimmon has been improved until it is as large as a peach 
and is an article of diet as fresh, dried, and preserved fruit. At the 
present time we leave most of our eastern nuts to grow, fall, and waste. 
But the plant-breeder tells us that it is only a matter of time and 
patience to make, by repeated crosses, a good crop-yielding hickory 
tree. We may have almost an ideal hickory nut with the delicious, 
sweet flavor of the shellbark, the thin shell of the Kentucky nut, and 
enough of the size of the Indiana giant to put it in the English-walnut 
class so far as food value, accessibility, and desirability are concerned. 

For New England the point of the discussion is this : these trees, 
these engines of production, do not depend upon the plow. They can 
wedge their trunks in between the rocks, send their roots far down 
into the glacial subsoil, rear their spreading branches out into the 
clouds, ram, sunshine, and produce. What care they for rocks ? If 
there is earth among them, the tree roots will find it. If the rocks 
encumber the surface, they merely serve as a mulch to keep in the 
moisture. 

What New England needs is an intelligent agriculture that is 
adjusted to her resources. The agriculture of New England came 
from Old England, Old England got it from the Romans, the Romans 
got it from the Egyptians, and the Egyptians got it from the Nomad's 
wife. There is nothing like a good old ancestry, but possibly we have 
overdone it a bit in our farming. New England, like all hilly and 
rocky countries, has a greater need for a tree-crop agriculture than it 
has for any other thing in the whole list of relations between man and 
nature. With the proper improved varieties of tree crops there is 
no reason why Massachusetts might not, square mile for square mile, 
produce as many fat pigs or fat sheep or fat turkeys as Kansas. The 
proper succession of fruiting mulberries, chestnuts, walnuts, pecans, 
hickories, shagbarks, filberts, and many other tree crops that might 
be introduced from this and other lands would give one continuous 
succession of workless harvests to which the pigs, sheep, and turkeys 
could walk and eat. Then those small sections of the land that are 
fit for tillage could be tilled to the limit, intensively, to fill in the gaps. 
A sugar-maple orchard of selected and improved varieties would, of 
course, yield much more than the present scrub maple orchards of 



LAND AND OTHER AGENTS OF PRODUCTION 181 

the North. In fact, it is probable that there are enough varieties 
of tree crops now in existence and fairly well proved to make the 
rocky Massachusetts tree farm yield income to match the $150 per 
acre land of the Illinois or Kansas farm. 

E. The Law of Diminishing Returns from Land 

51. THE CLASSIC STATEMENT OF DIMINISHING RETURNS* 
By DAVID RICARDO 

If all land had the same properties, if it were unlimited in quan- 
tity and uniform in quality, no charge could be made for its use 
unless where it possessed peculiar advantages of situation. It is only, 
then, because land is not unlimited in quantity and uniform in quality, 
and because in the progress of population land of an inferior quality, 
or less advantageously situated, is called into cultivation, that rent is 
ever paid for the use of the original and indestructible powers of the 
soil. With every step in the progress of society which shall oblige 
a country to have recourse to land of a worse quality (second or third 
degrees of fertility) to enable it to raise its supply of food, rent on 
all the more fertile land will rise. 

It often, and, indeed, commonly, happens that before No. 2, 3, 4, 
or 5, or the inferior lands are cultivated, capital can be employed more 
productively on those lands which are already in cultivation. It may 
perhaps be found that by doubling the original capital employed on 
No. 1, though the product will not be doubled, will not be increased by 
100 quarters, it may be increased by 85 quarters, and that this 
quantity exceeds what could be obtained by employing the same 
capital on land No. 3. 

If, then, good land existed in a quantity much more abundant than 
the production of food for an increasing population required, or if 
capital could be indefinitely employed without a diminished return 
on the old land, there could be no rise of rent; for rent invariably 
proceeds from the employment of an additional quantity of labor with 
a proportionally less return. The most fertile, and most favorably 
situated, land will be first cultivated, and the exchangeable value of 
its produce will be adjusted in the same manner as the exchangeable 
value of all other commodities, by the total quantity of labor necessary 
in various forms from first to last to produce it and bring it to 

1 Adapted from Principles of Political Economy and Taxation (Bohn edi- 
tion), pp. 44-49- 



182 » AGRICULTURAL ECONOMICS 

market. When land of an inferior quality is taken into cultivation, 
the exchangeable value of raw produce will rise, because more labor 
is required to produce it. 

52. EXTENSIVE AND INTENSIVE MARGINS OF CULTIVATION 1 

By HENRY ROGERS SEAGER 

To give precision to the statement of the law of diminishing 
returns it is customary to distinguish between the "extensive" and 
the " intensive" margins of cultivation. If, for example, the demand 
for corn increases so as to induce the production of a larger crop, the 
additional supply may come from either or both of two sources. 
Corn-growers in the settled portions of the country may make their 
farming more intensive; that is, apply more labor and capital to the 
cultivation of each acre and in this way add to their crops. Others 
may be induced to take up new land and prepare it hastily for extensive 
farming. If both results follow the prospect for a somewhat higher 
price for corn, as they would if farmers were always alert to their own 
interests and able to adapt their methods promptly to changing mar- 
ket conditions, there will be two situations in which the expenses of 
producing corn are just covered by the price. The corn grown on 
the poorest land hastily plowed and planted, or on the extensive 
margin of cultivation, will barely repay the expenses of production. 
So also will the additional corn raised by the application of additional 
labor and capital at the intensive margin of cultivation. The producer 
at either margin may in such a case be properly described as the 
marginal producer, whose expenses of production are just covered by 
the price of the product. The fact that his additional corn just about 
pays for itself will not, of course, prevent the farmer at the intensive 
margin from realizing a rent from that corn which he continues to 
produce at smaller proportionate expense. 

53. THE LAW OF DIMINISHING RETURNS ELABORATED AND 

QUALIFIED 2 

By JOHN STUART MILL 

Land differs from the other elements of production, labor, and 
capital in not being susceptible of indefinite increase. Its extent is 
limited, and the extent of the more productive kinds of it more 

1 Adapted from Principles of Economics, p. 130. (Copyright by Henry Holt 
& Co.) 

2 Adapted from Principles of Political Economy, Book I, chap. xii. 



LAND AND OTHER AGENTS OF PRODUCTION 183 

limited still. It is also evident that the quantity of produce capable 
of being raised on any given piece of land is not indefinite. This 
limited quantity of land, and limited productiveness of it, are the real 
limits to the increase of production. Such limitation is not, however, 
like the obstacle opposed by a wall, which stands immovable in one 
particular spot, and offers no hindrance to motion short of stopping 
it entirely. We may rather compare it to a highly elastic and exten- 
sible band, which is hardly ever so violently stretched that it could 
not possibly be stretched any more, yet the pressure of which is felt 
long before the final limit is reached, and felt more severely the 
nearer that limit is approached. 

After a certain, and not very advanced, stage in the progress of 
agriculture, it is the law of production from the land that, in any 
given state of agricultural skill and knowledge, by increasing the 
labor the produce is not increased in an equal degree; or, to express 
the same thing in other words, every increase of produce is obtained 
by a more than proportional increase in the application of labor to the 
land. This general law of agricultural industry is the most important 
proposition in political economy. The most fundamental errors 
which still prevail on our subject result from not perceiving this law 
at work underneath the more superficial agencies on which attention 
fixes itself. 

When, for the purpose of raising an increase of produce, recourse 
is had to inferior land, it is evident that, so far, the produce does not 
increase in the same proportion with the labor. The very meaning 
of inferior land is land which with equal labor returns a smaller amount 
of produce. Land may be inferior either in fertility or in situation. 
The one requires a greater proportional amount of labor for growing 
the produce, the other for carrying it to market. If the land A yields 
a thousand quarters of wheat to a given outlay of wages, manure, 
etc., and in order to raise another thousand recourse must be had to 
the land B, which is either less fertile or more distant from the mar- 
ket, the two thousand will cost more than twice as much labor as the 
original thousand, and the produce of agriculture will be increased in 
a less ratio than the labor employed in procuring it. 

Instead of cultivating the land B, it would be possible, by higher 
cultivation, to make the land A produce more. It might be plowed 
or harrowed twice instead of once; it might be oftener or more thor- 
oughly weeded; more elaborate implements might be used in its cul- 
tivation; a greater quantity or more expensive kinds of manure might 
be applied, or when applied they might be more carefully mixed and 



184 AGRICULTURAL ECONOMICS 

incorporated with the soil. These are some of the modes by which 
the same land may be made to yield a greater produce; and when a 
greater produce must be had, some of these are among the means 
usually employed for obtaining it. But, that it is obtained at a more 
than proportional increase of expense is evident from the fact that 
inferior lands are cultivated. Inferior lands, or lands at a greater dis- 
tance from the market, of course yield an inferior return, and an 
increasing demand cannot be supplied from them unless at an aug- 
mentation of cost, and therefore of price. If the additional demand 
could continue to be supplied from the superior lands by applying 
additional labor and capital, at no greater proportional cost than that 
at which they yield the quantity first demanded of them, the owners 
or farmers of those lands could undersell all others, and engross the 
whole market. Lands of a lower degree of fertility, or in a more 
remote situation, might indeed be cultivated by their proprietors for 
the sake of subsistence or independence; but it never could be the 
interest of anyone to farm them for profit. That a profit can be 
made from them sufficient to attract capital to such an investment 
is a proof that cultivation on the more eligible lands has reached 
a point beyond which any greater application of labor and capi- 
tal would yield, at the best, no greater return than can be obtained 
at the same expense from less fertile or less favorably situated 
lands. 

The principle which has now been stated must be received, no 
doubt, with certain explanations and limitations. Even after the 
land is so highly cultivated that the mere application of additional 
labor, or of an additional amount of ordinary dressing, would yield 
no return proportioned to the expense, it may still happen that the 
application of a much greater additional labor and capital to improv- 
ing the soil itself, by draining or permanent manures, would be as 
liberally remunerated by the produce as any portion of the labor and 
capital already employed. It would sometimes be much more amply 
remunerated. But even when such works had been accomplished, 
much would undoubtedly continue to be produced under less advan- 
tageous conditions, and with a smaller proportional return, than that 
obtained from the best soils and situations. And in proportion as the 
further increase of population required a still greater addition to the 
supply, the general law would resume its course, and the further aug- 
mentation would be obtained at a more than proportionate expense 
of labor and capital. 



LAND AND OTHER AGENTS OF PRODUCTION 185 

There is, however, another agency, in habitual antagonism to the 
law of diminishing return from land. For this I use the somewhat 
vague and general expression " progress of civilization," because the 
things to be included are so various that hardly any term of a more 
restricted signification would comprehend them all. 

Of these, the most obvious is the progress of agricultural knowl- 
edge, skill, and invention. Improved processes of agriculture are of 
two kinds : some enable the land to yield a greater absolute produce, 
without an equivalent increase of labor; others have not the power of 
increasing the produce, but have that of diminishing the labor and 
expense by which it is obtained. Among the first are to be reckoned 
the disuse of fallows, by means of the rotation of crops and the intro- 
duction of new articles of cultivation capable of entering advanta- 
geously into the rotation. These improvements operate, not only by 
enabling the land to produce a crop every year instead of remaining 
idle one year in every two or three to renovate its powers, but also 
by direct increase of its productiveness, since the great addition made 
to the number of cattle by the increase of their food affords more 
abundant manure to fertilize the corn lands. 

Next in order comes the introduction of new articles of food con- 
taining a greater amount of sustenance, like the potato, or more 
productive species or varieties of the same plant, such as the Swedish 
turnip. In the same class of improvements must be placed a better 
knowledge of the properties of manures, and of the most effectual 
modes of applying them; the introduction of new and more powerful 
fertilizing agents, such as guano, and the conversion to the same 
purpose of substances previously wasted; inventions like subsoil- 
ploughing or tile-draining; improvements in the breed or feed of 
laboring cattle; and the like. Improvements which diminish labor, 
but without increasing the capacity of the land to produce, are such 
as the improved construction of tools; the introduction of new instru- 
ments which spare manual labor, as the winnowing and threshing 
machines; a more skilful and economical application of muscular 
exertion, such as the introduction, so slowly accomplished in England, 
of Scotch ploughing, with two horses abreast and one man instead 
of three or four horses in a team and two men, etc. 

Analogous in effect to this second class of agricultural improve- 
ments are improved means of communication. Good roads are 
equivalent to good tools. It is of no consequence whether the 
economy of labor takes place in extracting the produce from the soil 



1 86 AGRICULTURAL ECONOMICS 

or in conveying it to the place where it is to be consumed; not to 
say, in addition, that the labor of cultivation itself is diminished by 
whatever lessens the cost of bringing manure from a distance, or 
facilitates the many operations of transport from place to place which 
occur within the bounds of the farm. Railways and canals are vir- 
tually a diminution of the cost of production of all things sent to 
market by them; and literally so of all those things the appliances 
and aids for producing which they serve to transmit. By their means 
land can be cultivated which would not otherwise have remunerated 
the cultivators without a rise of price. 

From similar considerations, it appears that many purely mechani- 
cal improvements, which have, apparently at least, no peculiar con- 
nection with agriculture, nevertheless enable a given amount of food 
to be obtained with a smaller expenditure of labor. A great improve- 
ment in the process of melting iron would tend to cheapen agricultural 
implements, diminish the cost of railroads, of wagons and carts, ships, 
and perhaps buildings; and would hence diminish the.cost of food. 
The same effect would follow from better application of wind or water 
power, engineering inventions useful in drainage, etc. 

Likewise, improvements in government, and almost every kind of 
moral and social advancement, operate in the same manner to counter- 
act the law of diminishing return to agricultural labor. Suppose a 
country in the condition of France before the Revolution; the removal 
of a fiscal burden on agriculture, such as tithe, has the same effect 
as if the labor necessary for obtaining the existing produce were sud- 
denly reduced one-tenth. The abolition of corn laws, or of any other 
restrictions which prevent commodities from being produced where 
the cost of their production is lowest, amounts to a vast improvement 
in production. It is well known what has been the effect in England 
of badly administered poor laws, and the still worse effect in Ireland 
of a bad system of tenancy, in rendering agricultural labor slack and 
ineffective. No improvements operate more directly upon the pro- 
ductiveness of labor than those in the tenure of farms and in the laws 
relating to landed property. Above all, the acquisition of a perma- 
nent interest in the soil by the cultivators of it is as real and great 
an improvement in production as the invention of the spinning jenny 
or the steam engine. 

We may say the same of improvements in education. The intelli- 
gence of the workman is a most important element in the productive- 
ness of labor. To look no farther than the most obvious phenomena, 



LAND AND OTHER AGNETS OF PRODUCTION 187 

the backwardness of French agriculture in the precise points in which 
benefit might be expected from the influence of an educated class is 
partly accounted for by the exclusive devotion of the richer landed 
proprietors to town interests and town pleasures. 

54. SCIENTIFIC RESEARCH AS A MEANS OF INCREASING 
AGRICULTURAL PRODUCTION 1 

By M. B. WAITE 

The real reason why science, and particularly chemistry and the 
biological sciences, have in the past been of so little use to the farmer 
is because the science itself was weak. Only fragmentary, isolated 
facts had been worked out; only a few of its principles had been 
discovered. Bacteria had been known and described to some extent 
since the days of Ehrenberg (1830). It remained for Pasteur, in 1862, 
to prove that they were the real cause and not the result of fermenta- 
tion. He discovered the first bacterial disease, a silk-worm disease, 
in 1870. A year or two later he proved that anthrax of cattle was 
caused by a bacillus. Burrill, in 1878, discovered that pear blight 
was caused by bacteria, the first discovery of a bacterial plant 
disease. Koch discovered the germ of tuberculosis in 1884. Since 
that time there has been a continual stream of new and important 
discoveries in bacteriology of immediate and practical benefit to 
agriculture. 

The fungous diseases of plants have been known and described for 
one hundred and fifty years. The number has been added to con- 
tinually until it runs up into the thousands. Many single species of 
both cultivated and native plants have from fifty to one hundred 
fungous enemies attacking them. Not until Millardet discovered the 
efiicacy of Bordeaux mixture in the control of the vine mildew in 1883 
and published his results in 1885 did we have a satisfactory and direct 
way of killing these fungous enemies or preventing their attack on the 
host plant. A new word, "fungicide," had to be added to the dic- 
tionary. 

Chemistry has done great things for agriculture. It has fur- 
nished the methods of fertilizing the soil and of securing these fertilizers 
from the earth — potash, phosphoric acid, and nitrogen. It has 

1 Adapted from "The Importance of Research as a Means of Increasing 
Agricultural Production," The Annals, LIX (May, 1915, on "America's Industrial 
Opportunity"), 41-50. 



1 88 AGRICULTURAL ECONOMICS 

helped us in compounding a balanced, complete fertilizer, varying to 
suit soil conditions and crops. Chemistry, combined with plant- 
breeding methods, has increased the sugar content of sugar beets by 
furnishing a method for determining the high sugar content of certain 
specimens to be used for seed production. It furnishes the basis of 
much agricultural experimentation and assists in nearly all lines 
of research. 

The science of zoology has contributed much information of use 
to agriculture. Perhaps in no way has it been more useful than 
through the researches on the diseases of domestic animals and the 
methods ol controlling or mitigating these diseases. The science of 
entomology, likewise, has been of the utmost utility to farmers in 
crop production in recent years. Economic entomology may be said 
to date back for at least two generations. The control of insect pests 
is perhaps one of the greatest contributions of science to the farmer. 
A few striking examples may be used to illustrate the success that has 
been achieved in this line. 

About forty years ago the potato bug or Colorado potato beetle 
started in to simply eat up or clean up the potato crop of this country. 
The entomologists readily fixed up a poison to kill him. The codling 
moth or apple worm was thought by many to originate spontaneously 
within the fruit. The entomologists have taught us that it is the 
larva of a harmless-looking little gray moth. They have worked out 
the life-history of the insect and have given us a spraying routine with 
arsenical poisons by which practically complete control is maintained. 
The Hessian fly has been known to destroy half or two-thirds of the 
wheat crop in the wheat-growing districts. The problem was attacked 
by the entomologists and the life-history of the insect fully worked out, 
with the result that a practical, satisfactory remedy was developed, 
the utilization of which entails no additional expense to the farmer. 
The remedy consists merely in deferring the planting of the wheat 
until after the emergence and death of the adult flies. The cotton- 
boll weevil entered this country from Mexico about twelve years ago 
and its effects were so severe that it threatened the destruction of the 
entire cotton industry of the United States. Scientific entomologists 
attacked the problem vigorously and by means of a thorough investi- 
gation of the life-history and habits of this pest found a way of getting 
around it. 

Previous to 1885, the farmer, fruit-grower, or gardener was prac- 
tically at the mercy of the fungous pests on his crops. The losses are 



LAND AND OTHER AGENTS OF PRODUCTION 189 

still very large. It has been estimated that all plant production in 
this country is annually reduced from 20 per cent to 25 per cent 
through plant diseases, and there is considerable foundation for this 
estimate. When we realize that we are dealing with a crop worth 
annually between six and seven billion dollars on the farm, the mag- 
nitude of this loss is appalling. Only a part of this can, of course, ever 
be reached and prevented. Many diseases are physiological, pro- 
duced by the effect of climatic and soil conditions difficult or impos- 
sible to change. In the irrigated regions of the West, new types of 
physiological diseases have caused serious troubles in the orchards of 
deciduous fruits and in the orange groves. It may take years of care- 
ful research to even find out the cause of some of these troubles, and 
they appear to be difficult to remedy even when the cause is thor- 
oughly known. 

On the other hand, the fungous diseases of plants have yielded to 
research during the last thirty years in a manner which is really mar- 
velous. The black rot of the grape, a native disease on American 
grapevines, attacked our rapidly increasing grape industry in the 
eastern United States in the early eighties. The Department of 
Agriculture at Washington started experiments in 1886 and within the 
next four or five years gave to the grape-growers a complete and suc- 
cessful routine treatment by spraying through which from 95 per cent 
to 98 per cent of the crop could be saved. This treatment is the very 
basis of the grape industry. Without it the vines would bear only 
ragged and unsightly bunches scarcely fit for shipping to market. 

I should not, however, convey the idea that all plant diseases have 
been brought under control. Many problems, like the crown gall 
of fruit and other trees, the root rots, the new citrus canker, and 
numerous others, still attack vegetation unchecked, or only partly 
controlled, or, in case of the citrus canker, controlled by heroic 
methods, such as burning up the entire tree when only a single leaf 
is affected. 

I have mentioned earlier in this paper chemical investigations of 
the soil. At first, that was thought to be the important problem in 
soil studies. Later it was shown that the physical properties of the 
soil were as important, or possibly more important, than its chemical 
composition. Still later, within the last twenty years, it has been 
realized by investigators that the biological properties of the soil are 
even more important than either its chemical or its physical proper- 
ties. The soil under our feet is teeming with bacteria, with fungi, with 



190 AGRICULTURAL ECONOMICS 

algae, and with microscopic animal life, chiefly nematodes. The 
species of the latter alone run up into the thousands. This branch of 
science has only been entered upon. It may be scarcely said to have 
been exploited at all. It is no exaggeration to say that a cubic foot 
of ordinary garden soil presents more unsolved problems in biology 
than the entire solved problems up to the present time, and these 
problems are more difficult than the building of the Panama Canal, 
including both its engineering and its biological achievements ; more 
difficult than wireless telegraphy, than submarine or aerial naviga- 
tion, for these latter have in part been solved. If we may judge the 
future from the past, while great things may be expected from soil 
bacteriology and soil biology during the next hundred years, at the 
end of that period new problems just as important will be clamoring 
for solution. 

One strikingly important thing has already been brought out in 
soil bacteriology. In this case the discoveries are partly linked with 
plant physiological discoveries. I refer to the nitrogen-assimilating 
organisms in the root tubercles of the Leguminosae. It has been 
known for over a hundred years that clovers and some similarly 
related plants possess a remarkable power in renewing soil fertility 
when these plants are plowed under for the growing of subsequent 
crops. It was finally discovered that this property depended on the 
presence of minute tubers or tubercles that occur abundantly on the 
roots and that the real function was performed by a tiny bacillus which 
lives in these tubercles. The bacteria living in the tubercles are 
able to force the free nitrogen of the air into chemical combinations 
and build up nitrates subsequently readily converted into proteids, 
the most valuable food of both plants and animals. Still later 
investigations have developed practical methods of cultivating and 
distributing these germs for soil inoculation. 

F. The Conservation of Nature's Agricultural Resources 

55. THE DEMAND FOR CONSERVATION OF THE LAND 1 
By JAMES J. HILL 

How are we caring for the soil, and what possibilities does it hold 
out to the people of future support ? We are only beginning to feel 
the pressure upon the land. The whole interior of this continent, 

1 Adapted from The Natural Wealth of the Land and Its Conservation, address 
at the Conference of the Governors of the United States, 1908, pp. 67-71. 



LAND AND OTHER AGENTS OF PRODUCTION 191 

aggregating more than 500,000,000 acres, has been occupied by 
settlers within the last fifty years. What is there left for the next 
fifty years ? Excluding arid and irrigable areas, the latter limited by 
nature, and barely enough of which could be made habitable in each 
year to furnish a farm for each immigrant family, we have only 
50,000,000 acres of surveyed and 36,500,000 acres of unsurveyed land 
as our actual remaining stock. And 21,000,000 acres were disposed 
of in 1907. How long will the remainder last? No longer can we 
say that "Uncle Sam has land enough to give us all a farm." 

Equally threatening is the change in quality. There are two ways 
in which the productive power of the earth is lessened: first by erosion 
and the sweeping away of the fertile surface into streams and thence 
to the sea, and second by exhaustion through wrong methods of cul- 
tivation. The former process has gone far. Thousands of acres in 
the East and South have been made unfit for tillage. North Carolina 
was, a century ago, one of the greatest agricultural states of the 
country and one of the wealthiest. Today as you ride through the 
South you see everywhere land gullied by torrential rains; red and 
yellow claybanks exposed where once were fertile fields; and agri- 
culture reduced because its main support has been washed away. 
Millions of acres, in places to the extent of one-tenth of the entire 
arable area, have been so injured that no industry and no care can 
restore them. 

Far more ruinous, because universal and continuing in its effects, 
is the process of soil exhaustion. It is creeping over the land from 
East to West. The abandoned farms that are now the playthings of 
the city's rich or the game preserves of patrons of sport bear witness 
to the melancholy change. New Hampshire, Vermont, northern New 
York, show long lists of them. In western Massachusetts, which once 
supported a flourishing agriculture, farm properties are now for sale 
for half the cost of the improvements. Professor Carver, of Harvard, 
has declared after a personal examination of the country that "agri- 
culture as an independent industry, able in itself to support a com- 
munity, does not exist in the hilly parts of New England." 

The same process of deterioration is affecting the farm lands of 
western New York, Ohio, and Indiana. Where prices of farm lands 
should rise by increase of population, in many places they are falling. 
Between 1880 and 1900 the land values of Ohio shrank $00,000,000. 
Official investigation of two counties in central New York disclosed 
a condition of agricultural decay. In one, land was for sale for about 



192 AGRICULTURAL ECONOMICS 

the cost of improvements, and 150 vacant houses were counted in a 
limited area; in the other, the population in 1905 was nearly 4,000 
less than it was in 1855. 

Practically identical soil conditions exist in Maryland and Vir- 
ginia, where lands sell at from $10 to $30 an acre. In a hearing before 
an industrial commission, the chief of the Bureau of Soils of the 
Department of Agriculture said: "One of the most important causes 
of deterioration, and I think I should put this first of all, is the method 
and system of agriculture that prevails throughout these states. 
Unquestionably the soil has been abused." The richest region of the 
West is no more exempt than New England or the South. The soil 
of the West is being reduced in agricultural potency by exactly the 
same processes which have driven the farmer of the East, with all his 
advantage of nearness to markets, practically from the field. 

Within the last forty years a great part of the richest land in the 
country has been brought under cultivation. We should, therefore, 
in the same time have raised proportionately the yield of our principal 
crops per acre, because the yield of old lands, if properly treated, 
tends to increase rather than to diminish. The year 1906 was one of 
large crops and can scarcely be taken as a standard. We produced, 
for example, more corn that year than had ever been grown in the 
United States in a single year before. But the average yield per acre 
was less than it was in 1872. We are barely keeping the acre-product 
stationary. The average wheat crop of the country now ranges from 
12J bushels in ordinary years to 15 bushels per acre in the best seasons. 
And so it is on down the line. 

But the fact of soil waste becomes startlingly evident when we 
examine the record of some states where single cropping and other 
agricultural abuses have been prevalent. Take the case of wheat, the 
mainstay of single-crop abuse. Many of us can remember when New 
York was the great wheat-producing state of the Union. The average 
yield of wheat per acre in New York for the last ten years was about 
18 bushels. For the first five years of that ten-year period it was 
18.4 bushels, and for the last five years 17.4 bushels. Farther west, 
Kansas takes high rank as a wheat-producer. Its average yield per 
acre for the last ten years was 14.16 bushels. For the first five of 
those years it was 15 . 14, and for the last five years 13 . 18. Up in the 
Northwest, Minnesota wheat has made a name all over the world. 
Her average yield per acre for the same ten years was 12 .96 bushels. 
For the first five years it was 13 . 12, and for the last five 12.8. We 



LAND AND OTHER AGENTS OF PRODUCTION 193 

perceive here the working of a uniform law, independent of location, 
of soil, or of climate. It is the law of a diminishing return due to soil 
destruction. Apply this to the country at large, and it reduces agri- 
culture to the condition of a bank whose depositors are steadily draw- 
ing out more money than they put in. 

What is true in this instance is true of our agriculture as a whole. 
In no other important country in the world, with the exception of 
Russia, is the industry that must be the foundation of every state at 
so low an ebb as in our own. According to the last census the average 
annual product per acre of the farms of the whole United States was 
worth $11 .38. It is little more than a respectable rental in commu- 
nities where the soil is properly cared for and made to give a reason- 
able return for cultivation. There were but two states in the Union 
whose total value of farm products was over $30 per acre of improved 
land. The great state of Illinois gave but $12.48, and Minnesota 
showed only $8.74. No discrimination attaches to these figures, 
where all are so much at fault. Nature has given to us the most 
valuable possession ever committed to man. It can never be dupli- 
cated, because there is none like it upon the face of the earth. And 
we are racking and impoverishing it exactly as we are felling the forests 
and rifling the mines. Our soil, once the envy of every other country, 
the attraction which draws millions of immigrants across the seas, 
gave an average yield for the whole United States during the ten years 
beginning with 1896 of 13.5 bushels of wheat per acre. Austria and 
Hungary each produced over 17 bushels of wheat per acre, France 
19.8, Germany 27.6, and the United Kingdom 32.2 bushels per acre. 
For the same decade our average yield of oats was less than 30 bushels, 
while Germany produced 46 and Great Britain 42. For barley the 
figures are 25 against 33 and 34 . 6 ; for rye 15.4 against 24 for Germany 
and 26 for Ireland. In the United Kingdom, Belgium, the Nether- 
lands, and Denmark a yield of more than 30 bushels of wheat per 
acre has been the average for the past five years. 

When the most fertile land in the world produces so much less 
than that of poorer quality elsewhere, and this low yield shows a 
tendency toward steady decline, the situation becomes clear. We are 
robbing the soil in an effort to get the largest cash returns from each 
acre of ground in the shortest possible time and with the least possible 
labor. 

In all parts of the United States, with only isolated exceptions, the 
system of tillage has been to select the crop which would bring in most 



194 AGRICULTURAL ECONOMICS 

money at the current market rate, to plant that year after year, and 
to move on to virgin fields as soon as the old farm rebelled by lowering 
the quality and quantity of its return. It is still the practice, although 
diversification of industry and the rotation of crops have been urged 
for nearly a century and are today taught in every agricultural college 
in this country. We frequently hear it said that the reduction in 
yield is due to the wearing out of the soil, as if it was a garment to be 
destroyed by the wearing. The fact is that soils either increase or 
maintain their productivity indefinitely under proper cultivation. If 
the earth, the great mother of human and animal life, is to "wear out," 
what is to become of the race ? 

56. A DEFENSE OF THE PIONEER 1 
By F. A. WALKER 

The American people, finding themselves on a continent contain- 
ing an almost limitless breadth of arable land of fair average fertility, 
having little accumulated capital and many urgent occasions for 
every unit of labor power they could exert, have elected — and in 
doing so they are, I make bold to say, fully justified on sound eco- 
nomical principles — to regard the land as practically of no value and 
labor as of high value; have, in pursuance of this theory of the case, 
systematically cropped their fields on the principle of obtaining the 
largest crops with the least expenditure of labor, limiting their 
improvements to what was required for the immediate purpose 
specified, and caring little about returning to the soil any equivalent 
for the properties taken from it by the crops of each successive year. 
What has been returned has been only the manure generated inci- 
dentally to the support of the live stock needed to work the farm. 
In that which is for the time the great wheat and corn region of the 
United States, the fields are, as a rule, cropped continuously, without 
fertilization, year after year, decade after decade, until their fertility 
sensibly declines. 

Decline under this regimen it must, sooner or later, later or sooner, 
according to the crop and according to the degree of original strength 
in the soil. Resort must then be had to new fields of virgin freshness, 
which with us in the United States has always meant "the West." 
When Professor Johnston wrote, the granary of the continent had 

1 Adapted from "American Agriculture," Tenth Census of the United States 
(1880), Vol. Ill, "Agriculture," pp. xxx-xxxiii. 



LAND AND OTHER AGENTS OF PRODUCTION 195 

already moved from the flats of the Upper St. Lawrence to the Mis- 
sissippi Valley, the north-and-south line which divided the wheat 
product of the United States into two equal parts being approximately 
the line of the eighty-second meridian. In i860 it was the eighty- 
fifth; in 1870, the eighty- eighth; in 1880, the eighty-ninth. 

Meanwhile, what becomes of the regions over which this shadow 
of partial exhaustion passes like an eclipse in its westward movement ? 
The answer is to be read in the condition of New England today. A 
part of the agricultural population is maintained in raising upon 
limited soils the smaller crops, garden vegetables and orchard fruits, 
and producing butter, milk, poultry, and eggs for the supply of the 
cities and manufacturing towns which had their origin in the flourish- 
ing days of agriculture, which have grown with the age of the com- 
munities in which they were planted, and which, having been well 
founded, when the decadence of agriculture begins flourish the more 
on this account, inasmuch as a second part of the agricultural popu- 
lation, not choosing to follow the westward movement of the grain 
culture, is ready with its rising sons and daughters to enter the mill 
and the factory. 

Still another part of the agricultural population gradually becomes 
occupied in the higher and more careful culture of the cereal crops on 
the better portion of the former breadth of arable land, the less 
eligible fields being allowed to spring up in brush and wood; deeper 
plowing and better drainage are resorted to; fertilizers are now 
employed to bring up and keep up the pristine fertility of the 
soil. 

And thus begins the serious systematic agriculture of an old state. 
Something is done in wheat, but not much. New York raised 
13,000,000 bushels in 1850; thirty years later, when her population 
has increased 70 per cent, she raises 13,000,000 bushels. Pennsyl- 
vania raised 15,500,000 bushels in 1850, with a population of 2,250,000; 
in 1880, with 4,500,000 inhabitants, she raised 19,500,000 bushels. 
New Jersey raised 1,600,000 bushels then; she raises 1,900,000 now. 

More is done in corn, that magnificent and most prolific cereal; 
more still in buckwheat, barley, oats, and rye. Pennsylvania, 
though the tenth state in wheat production, stands first of all the 
Union in rye, second in buckwheat, and third in oats; New York, the 
same New York whose Mohawk and Genesee valleys were a proverb 
through the world forty years ago, is but the thirteenth state in wheat. 
but is first in buckwheat, second in barley, and third in rye. 



196 AGRICULTURAL ECONOMICS 

It is in the way described that Americans have dealt with the soil 
opened to them by treaty or by purchase. And I have no hesitation 
in saying that posterity will decide, first, that it was both economically 
justifiable and politically fortunate that this should be done; and, 
secondly, that what has been done was accomplished with singular 
enterprise, prudence, patience, intelligence, and skill. 

It will appear, from what has been said under the preceding titles, 
that I entertain a somewhat exalted opinion concerning American 
agriculture. Indeed, I do. To me the achievements of those who in 
this new land have dealt with the soil, under the conditions so hurriedly 
and imperfectly recited, surpass the achievements of mankind in any 
other field of economic effort. With the labor power and capital 
power which we have had to expend during the past one hundred 
years, to have taken from the ground these hundreds, these thousands 
of millions of tons of food, fiber, and fuel for man's uses, leaving the 
soil no more exhausted than we find it today; and, meantime, to have 
built up, out of the current profits of this primitive agriculture, such a 
stupendous fund of permanent improvements, in provision for future 
needs and in preparation for a more advanced industry and a higher 
tillage — this certainly seems to me not only beyond the achievement, 
but beyond the power, of any other race of men. 

So much in retrospect. Let us now turn to the future. 

As we cast our eyes over the broad surface of the United States, 
it might seem that our people had, as yet, little more than commenced 
the occupation of their patrimonial estate. The wholly unsettled area 
of the United States, as shown by the census of 1880, amounted to 
about 1,400,000 square miles, being nearly one-half of the area of the 
country. But, notwithstanding the imposing total of 1,400,000 
square miles of still unsettled territory, the amount of land available 
for occupation for ordinary agriculture is not large. The Public Land 
Commission, in its report of 1880, says: "It was estimated, June 30, 
1879, that (exclusive of certain lands in southern states) of lands over 
which the survey and disposition laws had been extended, lying in the 
West, the United States did not own, of arable agricultural public 
lands, which could be cultivated without irrigation or other artificial 
appliances, more than the area of the present state of Ohio, viz., 
25,576,960 acres." 

It is, indeed, an astonishing announcement that the public land 
system, so far as relates to agricultural settlers, has virtually come to 
an end; that the homestead and pre-emption acts are practically 






\ 



LAND AND OTHER AGENTS OF PRODUCTION 197 

exhausted of their contents. However, the situation described is not 
so serious as might be thought. Vast quantities of land which have 
passed out of the hands of the government, through patents to states, 
to schools and colleges, to railways, etc., have not yet come under 
cultivation and occupation. Other large quantities are in the hands 
of private owners, who have never cultivated them, or, at least, have 
not done so bona fide, having taken them speculatively and kept up 
a merely formal compliance with the requirements of the law. Con- 
siderable additions to the public lands may also be expected from the 
reduction of Indian reservations, as the tribes concerned take up 
small lots in severalty and cede the remainder to the United States. 
Some parts of the extensive mineral and coal lands, withdrawn from 
the scope of the general land law, will unquestionably be found to 
have an agricultural value; and the surface will be worked for one 
kind of wealth while the recesses beneath are searched for another. 
It is, moreover, not improbable that the lands of the subhumid 
region, large parts of which, on the eastern side of this great longitu- 
dinal belt, have already been taken up and are under cultivation with 
varying success, large parts of which still remain open to settlement, 
may be found to have a somewhat wider adaption to agricultural pur- 
poses than is assigned them by Major Powell. There remains, more- 
over, to be brought into account the body of lands in the arid region, 
fairly subject to irrigation, which may be taken up under the desert- 
land act, and for which a sufficient amount of water is now found in 
the streams. The aggregate extent of these lands is stated by the 
Public Land Commission at 30,000,000 acres. There is reason to 
believe that large portions of this will soon, and all of it eventually, 
be made productive by systems of reservoirs and irrigating canals. 

As the joint effect of all these considerations, I reach the conclu- 
sion that it is not unreasonable to suppose that the extent of lands 
actually occupied for the production of exportable crops may go on 
increasing to the close of the century. Supposing the amount of 
arable lands in the possession of individuals disposed to cultivate 
them to attain, at that date, its maximum, the further question arises : 
What term may then be allowed us, as a people, for continuing our 
traditional system of cropping, with something like the degree of 
immediate profit to the owner of the soil (for, let it be borne in mind, 
it has never been the greed of occupiers who were not owners which 
has led to the steady pursuit of this system in the past) which has 
heretofore attended it ? 



198 AGRICULTURAL ECONOMICS 

Any answer that might be given to this question would, of neces- 
sity, be very largely conjectural. WhaJ: with improvements in agri- 
cultural methods and appliances, which are certain to be sooner 
apprehended and more widely used here than anywhere else in the 
world; what with the rapid extension of our railway lines; what with 
the intensification of culture, either through the subdivision of existing 
landed properties or through the multiplication of hired hands upon 
the larger farms, I see no reason to doubt that throughout the first half 
of the coming century the production of the chief staples of American 
agriculture might go on increasing, not only absolutely, but even per 
capita of population, as it has increased from 1800 to the present time, 
new lands, now nominally occupied, but not cultivated up to a half, 
a quarter, or a tithe of their capability, coming in, not only to make 
good the loss by exhaustion of lands now of full bearing virtue, but to 
allow the increase of our population up to the gigantic total of a hun- 
dred or a huntlred and twenty-five millions without impairing our 
ability to export as largely and as variously of agricultural produce 
as today. 

But there is even a better prospect for our agriculture than this. 
The powerful reasons, economical and political, which have in the 
past justified the cultivation of the soil, in some degree at the expense 
of future generations, have mainly ceased to exist, and will soon dis- 
appear altogether. The country, in its arable parts, is settled, and 
the line of population now rests near the base of the great sterile 
mountains which occupy so large a portion of the continent. The 
accumulation of capital out of the profits of American agriculture 
under the system of cropping that has been described have been so 
great at the North and West as even to keep ahead of the occasions for 
their remunerative investment, as is shown by a falling rate of interest; 
and there is no longer any reason to be found in the scarcity of capital 
for postponing the systematic cultivation of the soil. Lastly, the 
political reasons which made the early settlement of the country so 
urgently desirable are no longer of force. 

With adequate labor power and capital, and with all national 
exigencies satisfied, the time has come when economical and political 
considerations alike demand that the soil bequeathed to this genera- 
tion, or opened up by its own exertions, shall hereafter be deemed and 
held as a fund in trust for the American people through all time to 
come, not to be diminished or impaired for the selfish enjoyment of 
the immediate possessors. 



LAND AND OTHER AGENTS OF PRODUCTION 199 

Down to this time our apparently wasteful culture has, as I have 
sought to show, been the true economy of the national strength; our 
apparent abuse of the capital fund of the country has, in fact, effected 
the highest possible improvement of the public patrimony. Forty- 
eight noble states, in an indissoluble union, are the ample justification 
of this policy. Their schoolhouses and churches, their shops and 
factories, their roads and bridges, their railways and warehouses, are 
the fruits of the characteristic American agriculture of the past. 

But from a time not far distant, if indeed it has not already 
arrived, a continuance in this policy will be, not the improvement of 
our patrimony, but the impoverishment of our posterity. There will 
be all the difference between the past and the future, in this respect, 
morally, economically, and patriotically considered, which there is 
between the act of the strong, courageous, hopeful young man who 
puts a mortgage on his new farm that he may stock it and equip it 
for a higher productiveness, and the act of the self-indulgent man of 
middle life who encumbers his estate for the purposes of personal 
consumption. 

57. THE FUTURE USE OF LAND IN THE UNITED STATES 1 
By RAPHAEL ZON 

In a new country, with a wealth of land and a scanty population, 
the use to which the land is first put cannot serve as an indication of 
its best ultimate use. Gradually, as the population increases and the 
knowledge of the properties of the different classes of land grows, 
there is a closer correspondence between the character of the land and 
the crops to which it is devoted. In such densely populated countries 
as Belgium and France, practically every acre of land is put to its most 
appropriate use. Thus in France, for instance, 83 per cent of the 
poorer sandstone soils is forested, while of the fertile alluvial soils 
only 5 per cent is under forest. More than half (56 per cent) of the 
French forests are on non-agricultural, calcareous soils. But in this 
country there are still thousands of acres naturally adapted to agri- 
culture which are now under forest growth, chiefly hardwoods; and 
there are many slopes cleared of timber and turned into pastures or 
fields which in a few years become washed out and had best be kept 
under forest cover. 

1 Adapted from Circular No. 159, Forest Service, United States Department of 
Agriculture, pp. 4-15. 



200 AGRICULTURAL ECONOMICS 

How rapidly the relative areas of land devoted to the different 
purposes are changing may be seen from this. Hardly one hundred 
years ago the United States east of the Mississippi River was an 
almost unbroken forest, comprising something over 1,000,000 square 
miles, or about 700,000,000 acres. Now, after about a century of 
settlement, there are not more than 300,000 square miles of merchant- 
able forest land in the Eastern United States. About 330,000 square 
miles have been cleared for farm land. The remainder has been culled 
of its valuable timber and devastated by fire or else turned into useless 
brush land. With the growth of population and the greater demand 
for agricultural land the ratio between farm and forest land will 
change still further. The forests will be more and more crowded into 
the mountains and upon soils too thin or too poor for agricultural pur- 
poses. It may be safely assumed that in fifty or one hundred years 
the proportion of land devoted to the different purposes will change 
almost as much as it has during the past century. These changes will 
occur especially in the eastern part of the United States, because there 
the forest is not confined, as it is in the West, to high altitudes, where 
agriculture is generally impracticable. In the West the forests, with 
a few exceptions, as in the low country around Puget Sound, are in the 
high mountains, which rise in the midst of semiarid plains, and their 
original area of 150,000 square miles, half of which lies in the Sierra 
Nevadas and in the Cascades and half in the Rockies, has changed but 
very little since settlement. In the West, the increase of agricultural 
land must be secured chiefly through the irrigation of the semiarid 
land. 

If we take a long look ahead into the future and try to picture to 
ourselves what will be the ultimate proportion of farm, forest, range, 
and desert in this country fifty years from now, in the light of the 
increasing demand for agricultural land and of the approximate knowl- 
edge of the climatic conditions and the physical properties of the 
different lands in this country, we shall get something like the follow- 
ing condition: 

Absolute forest land 19 per cent 

Intermediate between agricultural and forest land 2 

Agricultural land 51 

Grazing land 26 

Barren land 2 

Agricultural land. — The area devoted to agriculture in a half- 
century, instead of being 21 per cent of the total area, as it is now, 



LAND AND OTHER AGENTS OF PRODUCTION 201 

will be nearer 50 per cent. That this is not an overestimate is indi- 
cated by the fact that during the last fifty years the improved farm 
land in this country has advanced in round figures from 113,000,000 
acres to 415,000,000 acres, an increase of 302,000,000 acres, or nearly 
370 per cent. At such a rate of increase, the agricultural area of this 
country in 1950 would require an additional area of over 1,000,000,000 
acres and would include nearly 80 per cent of the total land area of 
the United States. 

With more intensive methods of cultivation larger yields will 
undoubtedly be obtained from the same area, yet the area itself under 
agricultural crops will have to be increased, especially if we are to 
remain an exporting country. This is well shown in the case of some 
of the older countries. Thus in Belgium the arable land forms 63 per 
cent of the total land area, in Denmark 68, in France 48, and in Ger- 
many 47. Still, these countries are not exporters of cereals, although 
their methods of cultivation are highly developed. France is espe- 
cially interesting as a criterion, because its methods are most intensive 
and it is the only country that is self-sustaining; it produces 98 per 
cent of all the cereals which it consumes. There is little doubt that 
our population in the next fifty years will reach at least 150,000,000, 
or about 50 persons per square mile. Whether the acreage of 
improved farm land will increase at a much faster rate than the popu- 
lation, as has been the case in the past, or whether it will grow at the 
same or even a slower rate than the population, the future alone can 
tell; but increase it must. 

The Bureau of Statistics of the Department of Agriculture esti- 
mated in 1900 that upon the basis of our present actual consumption 
as a people, disregarding entirely our export trade, our country will 
require by the year 1931 the following additional acreage: for wheat, 
13,500,000 acres; for corn, 66,000,000 acres; for oats, 23,700,000 
acres; for the minor cereals, 10,000,000 acres; and for hay, 40,500,000 
acres; a total of 153,700,000 acres, without providing for the propor- 
tionately increased consumption of vegetables, fruits, and other 
products. 

The amount of farm land as compared with other classes of land 
is not determined, however, solely by economic conditions, but also 
by natural conditions. Thus in mountainous Switzerland, only 17 
per cent of the land is cultivated, and in Sweden and Norway, situated 
in an unfavorable climate and with a scanty population, the propor- 
tion of arable land is 8 . 7 per cent and 1 . 3 per cent, respectively. In 



202 AGRICULTURAL ECONOMICS 

the eastern part of our own country, with less rugged topography than 
the West and more favorable climatic conditions, the extension of 
farm land will go on at the expense of the land now occupied by the 
forest, but capable of producing crops, and the forest land proper will 
be confined to thin soil and the steep slopes of the mountains. Iti that 
part of the West which has a very rugged topography and very 
unfavorable climatic conditions, additional farm land will be won 
chiefly from the semiarid lands and not from the forests, which have 
been relegated by nature itself to soils and situations unsuitable for 
agriculture. There is, of course, here and there in the Pacific Coast 
mountains, and even in the Rocky Mountains, land which can be 
used for agricultural crops, but on the whole the western mountains 
will always remain chiefly a forest region and the relative area of 
forest land and farm land there will always be determined chiefly by 
nature. 

Grazing land. — Land chiefly valuable for grazing will form about 
one-fifth of the extent' of the United States proper. This land 
originally lay west of the one hundredth meridian, in the plains and 
mountain valleys, but with the advance of dry farming its eastern 
boundary has been shifted farther west to about the one hundred and 
third meridian. This land receives but a scanty rainfall and can pro- 
duce neither forest nor field crop, but supports a vegetation of hardy 
grasses. It was formerly the natural range of millions of buffalo and 
is now the grazing ground of herds of cattle and sheep. This land 
will remain largely a natural range, since the area which can be irri- 
gated, and thus reclaimed for agricultural purposes, or which can even 
be used for dry farming, is comparatively small. 

According to government estimates, the available water will be 
sufficient to irrigate 71,000,000 acres, or 1 acre in 7 J of the entire 
region. The Reclamation Service, however, does not expect to 
reclaim more than 5 per cent of all the arid land. This area, together 
with that used for dry farming, may hardly be sufficient even to. 
counterbalance the reduction of the productive area in the United 
States through the growth of cities, the building of railroads, and the 
general development of commerce and non-agricultural industry. 
With the exception of this 5 per cent and whatever area can be 
brought under dry farming, the rest of the land will be forever devoted 
to grazing purposes. While only a small portion of this land can be 
brought under the plow, the possibilities for increasing its productive- 



LAND AND OTHER AGENTS OF PRODUCTION 203 

ness as a range — at least the 300,000,000 acres of public grazing land — 
are very great. 

Desert land. — About 2 per cent of the total land area will forever 
remain desert. There are but few areas within the United States 
which, either on account of the intense heat, very low temperatures, 
alkali, or lack of rainfall, are unfit for the use of man and may be truly 
considered desert land. Such land is found in the Southwest about 
the Gulf of California, in Nevada, in Utah, and in Oregon in the form 
of arid basins. Ice-bound deserts are found in Alaska and on the 
glacier-covered mountains. This land must, so long as the climatic 
conditions of the country continue as they are, remain unproductive. 

Forest land. — As we have seen, although some land can be won 
from the plains through reclamation and dry farming, this area will 
hardly be enough to offset the loss of productive land through the 
growth of cities, and will at best supply only a small part of the addi- 
tional area needed for raising farm crops. In the West, except in a 
few places along the Pacific Coast, the forest area will not be reduced, 
for the simple reason that the land there is not suitable on the whole 
for agricultural purposes. If it were reduced, the result would be to 
reduce the farm land lying below, which is dependent upon irrigation. 
The additional agricultural land must come, therefore, chiefly from 
the East through improvement of the present unimproved farm land 
and swamp land, and at the expense of the forest land proper. The 
forest land will be confined more and more to land which is clearly 
unsuitable for agriculture, and will probably shrink to an area of 
about 360,000,000 acres, or nearly one-fifth of the total land 
surface. 

Intermediate land. — In addition to these areas which are unsuitable 
for any other purpose but that of raising timber, there will always be 
belts and patches of land which are neither exclusively forest land 
nor agricultural land, but may be devoted to either purpose as the 
local conditions (such as density of population and distance from 
markets) may make the one or the other more profitable. 

The hilly country of the Northeast, where stones and bowlders 
render cultivation difficult, the hilly land of the Piedmont Plateau 
and of the Ohio Valley, where the heavy soil makes erosion very 
great, and the sandy land along the Atlantic Coast and in the lake 
states are included in this class of land. This land, intermediate in 
character, is included at present largely with the unimproved farm 



204 AGRICULTURAL ECONOMICS 

land, and will be so more and more in the future. Of the 426,000,000 
acres of unimproved farm land, about 150,000,000 to 200,000,000 
acres are now estimated as woodlots, although not all farm woodlots 
are necessarily on intermediate land. The rest is swamps, barrens, 
and tide lands. With the increase in population and the increasing 
demand for farm lands for cultivation, the areas of individual woodlots 
will probably shrink. The number of woodlots, however, will 
undoubtedly increase as the people more fully realize their value as a 
protection against erosion, winds, and frost, and the woodlot will play 
an essential part in intensive methods of farm management. While 
it is difficult to predict their exact extent, it is safe to assume that 
there will always be a large area of farm woodlots. These woodlots 
will in the future, as at present, produce the posts, poles, and fuel 
needed on the farm and will grow some timber as well. 

Thus, in order to provide a population of 150,000,000 people with 
all the timber needed for construction, ties, poles, pulp, and all the 
various uses for which wood seems to be the only suitable material, 
there will be available an area of about 360,000,000 acres, in addition 
to the area under woodlots, which may be liberally estimated as 
100,000,000 acres, or a total of only about 450,000,000 acres of forest 
land against the present 550,000,000 acres. This forest land, in addi- 
tion to supplying the timber, must also protect the soil from erosion, 
regulate the stream flow, and exert its wholesome influence upon the 
lives of the people. 

Will this area be sufficient ? 

While we have at present no accurate means of determining the 
extent of forest land necessary for the regulation of stream flow and 
the protection of the soil against erosion, it may be inferred from a 
study of the conditions existing in other countries that, in order not 
to disturb the natural balance, the proportion of forest land to other 
kinds of land must be not less than from one-fifth to one-third of the 
total area of the country. 

With the exception of those countries which have naturally a 
humid climate, like Great Britain or the Netherlands, the countries 
with a forest area of only 20 per cent or less show usually to a marked 
degree bad climatic conditions, with prolonged droughts, frosts, and 
alternating floods and low water, as a result of the reduced forest area. 
Portugal, with a forest area of only 3! per cent of the total; Spain, 
with 16 per cent; Greece, with 13 per cent; Turkey, with 20 per cent; 
and Italy, with 14 per cent, are good examples. 






LAND AND OTHER AGENTS OF PRODUCTION 205 

It would be a shortsighted land policy to withhold agricultural 
land for the growing of timber. The fundamental principle upon 
which a wise national land policy should rest is that every acre of land 
should be put to the use under which it will bring the highest returns. 
Realizing as a nation that the forest lands in this country will have 
to be reduced in order to make room for agricultural crops, we should 
perceive that a national policy which will provide for the proper care 
and protection of the remaining forests is essential to the best develop- 
ment of the country. It is the duty of the government to help the 
people in adjusting the various lands for the uses to which they are 
best adapted by classifying them upon the basis of their properties 
and the climatic conditions. A thorough survey of the lands in the 
United States with a view of determining the best use to which the 
various classes could be put would go a long way toward bringing 
about the most; productive use of our greatest resource — the land. 

58. ONE AVENUE OF ESCAPE— ATMOSPHERIC NITROGEN 1 
By THOMAS H. NORTON 

One of the chief services rendered by chemistry during the nine- 
teenth century was to reveal the dependence of animal and vegetable 
life upon nitrogen, to define clearly the role of this element in nature, 
and to increase the number of technical products containing nitrogen. 
At the close of the century the consumption of such compounds had 
reached an enormous figure and was growing at a steadily increasing 
rate. At the same time economists saw clearly that the sources were 
limited, that their value would soon mount, and that at no distant 
date it would be impossible to supply the world's demand for com- 
bined nitrogen. The recognition of these facts has led to the intense , 
study of the best means of increasing the supply of nitrogenous com- 
pounds, one of the pressing economic problems of the twentieth cen- 
tury. Its importance is felt most keenly in Germany, where the 
annual per capita consumption of nitrogen in the form of crude pri- 
mary compounds has now reached 5.18 pounds. 

In the United States the per capita consumption is at present only 
a little over half that for Germany. It is, however, rapidly growing, 
and the United States is now sending abroad over $32,000,000 annually 
for the purchase of nitrogen in its various combinations, and over half 

1 Adapted from Reports of the Department of Commerce and Labor, Bureau of 
Manufactures, Special Agent Series, No. 52. 



206 AGRICULTURAL ECONOMICS 

of this sum is expended for a single item and goes to a single country — 
Chile. Further, nearly all the nitrogen contained in the lists of more 
valuable nitrogenous compounds is derived from Chile saltpeter, 
exported to European countries, chiefly Germany. The fact that the 
United States, in common with all civilized countries, is so dependent 
upon this one source, and the additional fact that the deposits of 
nitrate in Chile are not particularly extensive and are destined 
at an early date to complete exhaustion, constitute the nitrogen 
problem. 

The efforts that are being made to release the manufacturing and 
agricultural interests of the world from this dependence assumes an 
increasing importance each day. The most decided prqgress is being 
made by the chemists in Germany, Scandinavia, France, Switzerland, 
and Austria. Attempts to bring about a direct union between hydro- 
gen and nitrogen were made at an early date — by Renault in 1846. 
Professor F. Habber, of Carlsruhe, with the aid of G. Van Oordt, 
published in 1905 and 1906 a series of papers in which the general 
conditions for a successful solution were clearly defined. Professor 
Habber's process has come under the control of the Badische Anilin- 
und Sodafabrik of Ludwigshafen, the leading chemical company in 
Germany, which is devoting particular attention to the solution of 
the nitrogen question. It is actively engaged in perfecting this syn- 
thetic process so as to have it ready for technical purposes when the 
" psychological moment" arrives. 

Nitrogen is now supplied for industrial purposes by the Linde, 
Pictet, Claude, and other methods at exceedingly low rates. In 
France prices range from two to ten centimes per kilo (0.18 to 0.9 
cent per pound). In Germany three pfennigs per kilo (0.32 cent 
per pound) is not an uncommon rate. Herr Linde states that his 
smaller machines yielding one hundred cubic meters per hour (cubic 
meter = 35.3i4 cu. ft.) can supply 99.5 per cent nitrogen (0.5 per 
cent oxygen) for six pfennigs per cubic meter (1.25 kilo), or 0.648 
cent per pound. Very large plants can produce the gas somewhat 
more cheaply. It is probable that the owners of the Habber patents 
have it in their power to produce ammonia, and hence ammonia com- 
pounds, profitably at prices far below those which these substances 
now command in the world's markets. As ammonium sulphate, the 
dominant member of the group, is used almost exclusively as a fer- 
tilizer, and as ammonia is exclusively a by-product of the distillation 
and coking of coal, etc., its price is controlled almost entirely at present 



LAND AND OTHER AGENTS OF PRODUCTION 207 

by that of Chile saltpeter and the world's demand for combined nitro- 
gen. With any possible introduction on an unlimited scale of a new 
form or source of combined nitrogen, the production of Chile saltpeter 
would soon be largely abandoned. The production of ammonia from 
gas works and coke ovens would, however, continue indefinitely. 

A method for the synthetic production of ammonia has recently 
been patented in France by Brochep and Boiteau. Mention should 
also be made of the method proposed by H. S. Blackmore for effecting 
the synthesis of ammonia from its constituent elements. Details are 
lacking as to the technical value of this American process. 

The three principal processes mentioned above are the only ones 
thus far (January, 191 2) in successful operation on a commercial scale. 
In 1905, Swedish and especially French capital became interested in 
the undertaking already begun by Norwegian capital. The earlier 
organization was merged into a new company with a capital of $1,876,- 
000, entitled the Norwegian Hydro- electric Nitrogen Company. The 
plant was enlarged to twenty times its former capacity and valuable 
water-power sites in various parts of Norway were acquired. During 
this period the Badische Anilin- und Sodafabrik had pushed forward 
its tests with the Schonherr furnace in its experimental plant at 
Christiansand. The value of the new process became evident. Two 
other powerful German chemical companies of Berlin joined forces 
with the " Badische" to develop the Schonherr process. 

Under the circumstances, those in control of both processes decided 
that the best policy was to combine their interests and work in unison. 
Accordingly, in 1907 they created two new companies. The Nor- 
wegian Power Company has a capital of $4,288,000 and aims to 
acquire and regulate available water powers in the kingdom. The 
Norwegian Nitrate Works Company has a capital of $4,824,000 and 
confines its activity to the manufacture of nitrates and allied products. 
This creation of two distinct companies, one occupied with the devel- 
opment of power, the other with its utilization, is an imitation of the 
procedure of the capitalists who established electro-chemical industries 
in Switzerland. The Franco-Norwegian company and the German 
group each subscribed to one-half of the shares of the two new com- 
panies. The former retained its factory at Notodden and continued 
its operation. The latter did the same with its small plant at Chris- 
tiansand. All the energies of the newly founded companies were 
directed at once to the erection of a power works at Rjukan, and to 
the erection at Saaheim of the vast nitrate works that are to begin 



208 AGRICULTURAL ECONOMICS 

operation in 191 2. The confidence of capitalists in the future of the 
industry seems to be firm, and the Franco-Norwegian company has 
had no particular difficulty in securing funds in the Paris market. 
Its capital in January, 191 2, reached a total of $7,943,430. At the 
annual meeting in May, 191 1, dividends were declared on ordinary 
stock and of 8 per cent on the preferred stock. Much more capita 
will be needed before all of the water power now under the control of 
the company can be regulated and used in the production of nitrates. 
At the lowest estimate fifty million dollars will be required. 

In 1905 the export of calcium nitrate was 115 tons; in 1907, 1,344 
tons; in 1910, 13,531 tons. The export of sodium nitrite rose from 
900 tons in 1908 to 3,200 tons in 1 910. In the latter year 1,074 tons 
of sodium nitrate were exported. It is estimated that about 2,000 
tons of calcium nitrate are used annually as fertilizer in Norway. 
Including a certain amount of nitric acid for local consumption, the 
total production in 1910 was equivalent to about 22,000 tons of cal- 
cium nitrate. When the water power at Saaheim is completely uti- 
lized for the production of nitrate, the total Norwegian output will 
reach about 160,000 tons. This is equivalent in nitrogen to 5.7 per 
cent of the world's production of Chile saltpeter in 1910. 

It seems certain that the manufacture of nitric acid and the 
nitrates from the atmosphere is established upon a firm basis and 
destined to expand steadily within the limits fixed by the two main 
controlling factors: first, the cost of the available electrical energy, 
and second, the market rate for the time being and certainly for a 
fair share of the present century of Chile saltpeter. In considering to 
what extent the new processes for utilizing atmospheric nitrogen are 
susceptible of introduction under American conditions, the following 
points are to be borne in mind: The synthetic production of nitric 
acid from the atmosphere is a highly specialized process, dependent 
for the time being on exceptionally cheap sources of electricity. Many 
are laboring upon the problem of increasing the output per unit of 
electric power. Such experiments are most advantageously con- 
ducted in connection with the gigantic plants in Scandinavia. 

In conclusion, it can be regarded as beyond doubt that the present 
achievements of applied chemistry in this field render it possible for 
American industry and American agriculture to face the threatened 
exhaustion of the nitrate deposits of Chile and the demands attendant 
upon a rapidly growing population without any feeling of apprehen- 
sion. The processes already perfected and described in detail show 



LAND AND OTHER AGENTS OF PRODUCTION 209 

that there is no early danger of a nitrogen famine. The continued 
perfection of the processes and the appearance at frequent intervals 
of novel additional methods, as well as the popularization of the new 
forms of combined nitrogen, all point to a steady movement forward 
and to the assurance that combined nitrogen, as an industrial product, 
will be furnished on an increased scale without advance in cost above 
existing rates as fast as the demand is evident. 



IV 

HUMAN EFFORT AS A FACTOR IN AGRI- 
CULTURAL PRODUCTION 

Introduction 

It goes without saying that man himself is the center of our con- 
sideration in economics. In agricultural economics it is the farmer 
who is, in all cases, the ultimate subject of our concern. We have 
already examined his position as a consumer of wealth; in a later 
chapter we shall view him as a claimant for income; here we propose 
to see what part he plays as a factor in the productive process. 

Evidently it is a large part: the socialist goes so far as to say that 
the laborer is the only productive agent. Such is, however, an arro- 
gant account of the process by which man exploits the bounty of 
nature, and it makes scant acknowledgment to those who, in the past, 
have abstained from consuming all the products that came to their 
hand, in order that tools and machines and other forms of capital 
might be accumulated to equip our efforts. Still, we realize that some 
measure of human participation and direction is essential before these 
natural forces and these inert goods can be made to yield a maximum 
product of the kind most suited to man's needs and at the times and 
places of that need. 

Not quite so clear, perhaps, is the method by which we shall 
gauge and measure this productive element called labor. Just what 
are the conditions which cause the human factor to make its largest 
and most valuable contribution? If each human being meant, 
always and everywhere, one labor unit, the matter would be simple 
enough. But, even aside from the obvious fact that nature has given 
widely various physical endowments to the different members of our 
human family, labor in the economic sense means mental as well as 
physical effort, and the intellectual and spiritual qualities of indi- 
viduals vary even more widely than their stature or their strength. 
Most significant of all is the fact that human powers are to be valued 
in terms of their timeliness, their suitability to a given productive 
situation and equipment, rather than by any absolute standard. 
One hundred Chinese coolies are not the labor equivalent of one 

2IO 



HUMAN EFFORT AS A FACTOR IN PRODUCTION 211 

hundred European peasants, nor are these latter precisely equal in 
labor power to one hundred American farmers. Similar differences 
appear if we make comparison between different sections of our coun- 
try or periods of our history. This is evident if we set the farm 
workers of Massachusetts, Mississippi, and Montana side by side, or 
if we compare the homesteader of the past with the average American 
farmer of the present and the thoroughly trained and organized agri- 
culturists we aspire to see upon our farms in the near future. 

American farm labor in our grandfathers' day was fairly uniform 
in quality. Any stout boy not mentally handicapped might become, 
if he grew up amid actual farm experiences, a standard farmer. The 
rural superman was the one who could swing scythe or cradle or flail 
longer and stronger than his fellows. Then came the widespread use 
of farm machinery, and the man possessed of mechanical ability 
became differentiated from the mass of country workers. Within 
comparatively recent times success in farming has come to be identi- 
fied with ability to grasp and apply the principles of scientific agri- 
culture — if not always with full understanding, at least with some 
discernment and a steadying faith in the value of book-learning. 
Today the farmer finds hinself swept into the maelstrom of com- 
mercial competition, and he must add salesmanship, cost accounting, 
and scientific management to his list of qualifications if he is to make 
his work a success. 

In industrial life a similarly growing demand for greater technical 
efficiency and larger commercial abilities has been met by division of 
labor and specialization of functions. But the possibility of such a 
solution in the case of agriculture is decidedly less. The factory 
machine is made automatic or nearly so and a woman is set to tend 
it, or a whole battery of machines is put in charge of one mechanic. 
But though a binder be made to do a complex task automatically, the 
machine still requires a driver of some skill, more judgment, and not 
a little bodily strength. Likewise, a factory work-schedule may be 
laid out for months in advance and adjusted with the nicest degree of 
precision, but no farmer's day is sacred from the disrupting action of 
the weather, the unpredictable behavior of live stock, or other 
untoward event. 

This means that farm work has not been extensively specialized 
downward for "hands" or unskilled help. In this regard agriculture 
makes a more exacting demand for labor than do industrial callings, 
and is thus precluded from drawing, to any great extent, upon the 



212 AGRICULTURAL ECONOMICS 

common mobile supply. At the same time, it is more favorably 
situated for keeping up a steady flow of new workers born and reared 
within the families of the old. In the past, however, agriculture has 
been conspicuously unsuccessful in inducing the best of such workers, 
or at least those of large ideas, to remain in its ranks. For agricul- 
tural work has shown also a lack of specialization upward in the 
direction of large executive opportunity or to any high degree of pro- 
fessional expertness. Our captains of industry, though many of them 
born on the farm, have found scope for their talents and energies only 
in the city. Though the stay-at-home brother was, at least some- 
times, as able as the brother who went to town, he has remained mute 
and inglorious. 1 

It may well be asked whether this situation does not mean a loss 
in total labor power in the country. The demand is held rather 
rigidly at certain set specifications for all workers, with agriculture as 
a single trade to be carried on by apprentice, journeyman, and master- 
farmer. But God casts men in many molds, from those of extraordi- 
nary constructive and executive ability through countless gradations 
down to those who attain merely to a sort of vicarious efficacy by faith- 
fully following a routine laid out for them. Can agriculture devise 
ways of fitting appropriate tasks to each of these human powers, 
utilizing the greatest but not neglecting the least ? Until we do, the 
most valuable of all our productive resources runs to waste. To no 
small degree this becomes the problem of proper organization of agri- 
cultural production, and as such will be returned to in chapter vi. 

A. Population and the Labor Supply 

59. THE SUPPLY OF FARM LABOR 2 
By GEORGE K. HOLMES 

Industrialism and city expansion have advanced in this country 
faster than agriculture. The lure of the city and the city's illusion 
of higher wages are robbing the farm of its laborer and of the farmers' 
children who would otherwise be the potential farm owners of the 
future. 

1 To complete the allusion: Is he also to be congratualted on being "guiltless 
of his country's blood" — a satisfaction foregone by some of those city-migrating 
Cromwells who have captained our industrial revolution ? 

2 Adapted from " Supply and Wages of Farm Labor," Yearbook of the Depart- 
ment of Agriculture, 1910, pp. 189-200. 



HUMAN EFFORT AS A FACTOR IN PRODUCTION 213 

The more or less imperfect census record is the only information 
possessed in regard to the number of persons engaged gainfully in 
agriculture in this country. It is very considerably an imperfect 
record previous to the census of 1900, for the reason, principally, that 
enumerators often reported agricultural laborers as laborers without 
any designation of kind of work done by them, and for this reason the 
agricultural element in the population is represented as being less 
than the fact. It may be that in some small degree this observation 
applies to the census of 1900. 

In 1820 the number of persons of both sexes reported as being 
engaged in agriculture was 2,068,958, including slaves, and with the 
same inclusions the number for 1840 was 3,719,951; by 1880 the 
number had increased to 7,663,043; by 1890 to 8,466,363; and by 
1900 to 10,249,651 (census report on occupations). 1 In the later cen- 
suses the persons are described as having been employed gainfully, 
a distinction not made in the earlier ones. The statements are for the 
contiguous states and territories of the Union. - 

The agricultural element was 83 . 1 per cent of persons having 
occupations in 1820; 77.5 per cent in 1840; for gainful occupations, 
44. 1 per cent in 1880; 37 . 2 per cent in 1890; 35 .3 per cent in 1900. 
For 1910 the inference is that one-third or less of the persons having 
gainful occupations are embraced in the agricultural class. 1 

Agricultural laborers constitute one of the primary classes of 
occupations* and their number, as before stated, has been reported by 
all censuses as below the fact because the enumerators have reported 
many of them as general laborers. Another element of error has been 
the reporting of negro " croppers" in the South in the census of 1870 
and subsequent ones as farmers, whereas they would have been more 
properly designated as farm laborers, since they worked for wages, 
although the wages were contingent. Taking the record as it stands, 
the number of agricultural laborers in 1880 was 3,323,876; in 1890 it 
was 3,004,061; in 1900, 4,410,877. The erroneous character of the 
census enumeration with regard to agricultural laborers appears when 
it is observed that they were represented as being 43 . 4 per cent of all 
persons engaged gainfully in agriculture in 1880; only 35.5 per cent 
in 1890; and 43 per cent in 1900. 

1 The number for 1910 was 12,567,925 and the percentage 32.9 according to 
Table 9 (p. 41) of the "Occupational Statistics" (Vol. IV) of the Thirteenth Census, 
but this table shows figures slightly higher than those given above for previous 
years. — Editor. 



2 14 . AGRICULTURAL ECONOMICS 

Analysis of the occupation figures of the census of 1900 discovers 
that 12.3 per cent of all persons having gainful occupations in the 
North Atlantic division of the states were engaged in agriculture; 
26.1 per cent in the Western division; 36.3 per cent in the North 
Central division; 49.9 per cent in the South Atlantic division; and 
62.8 per cent in the South Central division, the average for the 
United States being 35.3 per cent. Agriculture as an occupation is 
of least account, relatively, in New England, New York, New Jersey, 
and Pennsylvania, the group of states constituting the North Atlantic 
division, and is of greatest account in the lower section of the Missis- 
sippi Valley, constituting the South Central division. 

The agricultural element in the population, as indicated by the 
occupation statistics of the census, is relatively a diminishing one, 
and it is generally believed that the agricultural laborers, or those who 
work for hire, are a diminishing relative element in the agricultural 
population, although this does not appear in the imperfect census 
record. 

Immigration contributed much to the agricultural population 
until the supply of cheap and otherwise desirable public land was 
nearly exhausted. At the present time, when land that immigrants 
can readily utilize for agriculture is high priced, they are not con- 
tributing appreciably to the agricultural population. During the 
year ending June 30, 1908, the immigrant aliens admitted to this 
country numbered 782,870, of whom, or their equivalent, 50 per cent 
returned to their native countries on account of the industrial depres- 
sion they found here; the number arriving in the fiscal year 1909 was 
751,786, of whom 30 per cent returned; and in 1910 the arrivals were 
1,041,570, of whom 17 per cent did not remain. 

By means of census publications, the white foreign-born agricul- 
tural laborers, as an element of the total white agricultural laborers, 
may be determined. In 1890 the white foreign-born element was 
13 . 1 per cent of all white agricultural laborers, and the percentage 
declined to 8.5 in 1900. In the latter year only 258,479 agricultural 
laborers were foreign-born whites in a total of 3,038,884 white agri- 
cultural laborers. The white foreign-born as an element of the total 
white agricultural laborers was 0.6 per cent in the South Atlantic 
States in 1900; 2 . 6 per cent in the South Central; n . 8 per cent in 
the North Central; 15.6 per cent in the North Atlantic; 20.9 per 
cent in the Western. 



HUMAN EFFORT AS A FACTOR IN PRODUCTION 215 

If the number of agricultural laborers of foreign parentage were 
taken for 1900 — and this number includes many laborers who were 
American born — it appears that they are 17.4 per cent of all agricul- 
tural laborers; but the percentages vary widely among the geographi- 
cal divisions — in the South Atlantic division, 0.8 per cent; South 
Central, 3.6 per cent; North Atlantic, 30.4 per cent; North Central 
40.7 per cent; and Western, 48 per cent. 

Women, as contributing to agricultural labor, are taking a smaller 
and smaller part, both relatively and absolutely. The census record 
gives 534,900 women as performing agricultural labor for hire in 1880; 
447,104 in 1890; and 663,209 in 1900. The apparent tendency 
expressed by these numbers is unbelievable and is directly contrary 
to a nation-wide acquaintance with the conditions of agricultural 
labor in this country. The deficiencies of the earlier census cannot 
be estimated, and it may be assumed that the number of female 
laborers reported in 1900 is near the fact. 

The female element of agricultural laborers for hire in 1900 in the 
total number engaged in agriculture was largest in the South Atlantic 
States, for which the percentage is 79.9; for the South Central 
States, 76.5 per cent; North Central, 13.5; Western, 12.8; North 
Atlantic, n; the United States, 67.9. 

In 1900 women were 10 . 9 per cent of all persons gainfully engaged 
in agriculture. As an element of negro agricultural laborers for hire, 
the female laborers are represented by 37.9 per cent in the United 
States for 1900; 40 . 6 per cent for the South Central States; 36 . 4 per 
cent for the South Atlantic; 1.3 per cent for the North Central; 
1 . 2 per cent for the Western; and o . 6 per cent for the North Atlantic. 

Dependence must be placed upon the general knowledge of con- 
ditions with regard to female labor on the farm. The outdoor work 
of white women on farms of medium or better sorts has greatly declined 
from early days, and the decline has been rapid during the last genera- 
tion. Of course negro women do much labor in the cotton field, but 
this diminishes year by year. 

It is not advisable to base any fine distinctions upon the censuses 
of 1890 and 1900 with regard to negroes employed in agriculture. 
But the comparison may indicate numerically the drift of negroes in 
their relation to agriculture. In 1900 the negroes who were gainfully 
engaged in agriculture numbered 1,704,904, and in 19 10 they num- 
bered 2,108,980, an increase of one-half of 1 per cent in their ratio to 



216 AGRICULTURAL ECONOMICS 

the entire number of persons gainfully employed in agriculture. The 
negro agricultural laborers of 1890 numbered 1,006,728, and in 1900 
they numbered 1,344,116, or a decline from 64.9 to 63.7 per cent in 
their ratio to negroes of all agricultural occupations. 

Negro farm labor in the South presents special problems which 
southern farmers fully understand. The census of 1900 disclosed the 
fact that negro labor was leaving the farm and migrating to town and 
city, to the railroad, to the logging and lumbering camp. The negro 
is still a necessity to southern agriculture, but he is gradually yielding 
his place to white labor. One of the old arguments in favor of slavery 
was that a white man could not work in a field under the southern 
sun, and it is still a common belief in the North that southern farm 
labor is performed almost exclusively by negroes. This, however, is 
not the fact. More than half the cotton crop is raised by white labor; 
in Texas three-fourths or more. In the sugar and rice fields white 
labor is common and in some places all but exclusive. Negroes are 
often disposed to migrate in pursuit of chimeras, so that they are 
easily induced to go to other parts of the country when employment 
is promised to them, and agents to promote their migration are found 
where states have not taxed them out of occupation or made it a 
criminal offense. 

If negroes and whites be combined, the negroes will be found to 
represent 13.7 per cent of all persons in all gainful occupations in 
1900, 20.6 per cent of all persons engaged gainfully in agricultural 
occupations, and 30 . 5 per cent of all agricultural laborers. The per- 
centages are almost exactly the same for 1890, except that the negro 
agricultural laborers were 36.8 per cent of the white and negro total, 
so that there was apparent decline in the negro element of agricultural 
laborers from 1890 to 1900. 

The movement from the city to farm for the purpose of permanent 
farm life and labor, either for hire or under ownership, has hardly 
become general enough in this country to present recognizable propor- 
tions. There is a little of this movement here and a little there, but 
nearly all cases are sporadic. 

But there is one sort of labor that goes from city to farm which 
has become large enough to be perceptible, and that is seasonal labor 
for employment, not in general farming operations, but for special 
purposes. The migration of men from cities to follow the wheat har- 
vest from Oklahoma to North Dakota is the best-known feature of 
this sort of farm labor. It is not so generally known that women and 



HUMAN EFFORT AS A FACTOR IN PRODUCTION 217 

children and some men, too, go from the city to the farm at certain 
seasons to harvest cucumbers to be sold to the pickle factory; to pick, 
grade, pack, and dry fruits; to harvest hops and berries, and dig 
potatoes; and so on with other crops that need a rush of labor at time 
of harvest. Some labor of this sort is applied also to the cultivation 
of crops, as in pulling weeds from beets and onions, but this labor 
does not seem to be used much for cultivating crops and not at all 
for planting. 

There are no indications that the town and city populations will 
supply any considerable part of the agricultural labor of the future. 
At any rate, the farmer would not need to get his labor from the 
cities if he could hold the country population to the soil, and the 
recognition of the importance of retaining the children on the farm 
and of keeping country labor from migrating to the cities is governing 
most of the work by nation and states in behalf of agriculture. 

The old practice was to trust to the printed page for the instruc- 
tion of the farmer, but in the course of time it was found that this 
was poorly productive of results. Then followed the farmers' insti- 
tute movement, which consisted of lectures; sometimes later with 
practical demonstrations. 

In the meantime the United States Department of Agriculture 
and the experiment stations got into more practical lines of work by 
means of special advice in particular cases, formerly by mail and now 
also by personal visits; so that it has been discovered that the most 
successful promotion of agricultural knowledge and practice is caused 
by practical demonstrations under the observation of the farmers to 
be instructed. 

The largest exponent of this latter plan of instruction is the 
farmers' co-operative demonstration work, maintained in the South 
by the Department of Agriculture with outside financial assistance 
and with the effective help of farmers and planters, without whose 
aid it would be a failure. 

Along with the foregoing is the very recent movement to instruct 
country children in agriculture at the beginning of their school life 
and to continue this instruction in the high school and the college. 
In this way the foundation will be laid for successful farming, and 
such farming implies the retention of children upon the farm. 

Still further and to the same end, many agencies are at work upon 
the country people to improve their dwellings, their modes of living, 
their home life, and their social life, which are ahead)- beginning to 



218 AGRICULTURAL ECONOMICS 

count against the unpleasantness of country life and in favor of making 
such life attractive. Influences of this sort, joined to the agricultural 
education of the young and to the practical teaching of the farmer 
how to do by doing, at the time when farming is prosperous and 
profitable, may be depended upon to save to our agriculture all the 
labor it will need for the maintenance of our national self-sufficiency. 

60. NATURAL INCREASE OF THE RURAL POPULATION 

a) IN EARLY TIMES 1 
By T. R. MALTHUS 

In the northern states of America, where the means of subsistence 
have been more ample, the manners of the people more pure, and the 
checks to early marriages fewer than in any of the modern states of 
Europe, the population was found to double itself, for some successive 
periods, every twenty-five years. In the back settlements, where 
the sole employment is agriculture, and vicious customs and unwhole- 
some occupations are little known, the population was found to 
double itself in fifteen years. 

b) AT THE PRESENT TIME 2 
By EDWARD VAN DYKE ROBINSON 

The country population of Minnesota increased very rapidly up 
to 1880, and at a less rapid rate up to 1900, since which date it has 
been practically stationary. This result might come about through 
a higher death-rate, a lower birth-rate, or the migration to the cities 
either of individuals or of large families. The death-rate certainly 
has not risen, though reliable statistics are not available as to its 
actual course for the country population. The birth-rate, on the other 
hand, has declined, at least in some of the older rural districts, from 
41 . 5 per thousand in i860 to 14 . 7 for a recent five-year period. This 
decline of nearly two-thirds in the birth-rate would alone suffice, if 
general, to explain the decrease of country population. That it is at 
least widespread is shown by the fact that in one school district after 
another where formerly there were 25 to 35 children, there are now 
only 5 to 10. Families now number 3 or 4 in place of 8 to 10. On the 

1 Adapted from An Essay on the Principle of Population, 2d ed., p. 4. 
! Adapted from Early Economic Conditions and the Development of Agriculture 
in Minnesota, University of Minnesota Studies in the Social Sciences, No. 3, 
pp. 215-16. (Copyright by the University of Minnesota.) 






HUMAN EFFORT AS A FACTOR IN PRODUCTION 219 

other hand, in communities where people of a single nationality and 
tongue are compactly settled, especially in the newer parts of the 
state, families of 8 to 10 children are still common. These facts sug- 
gest that the decrease of the birth-rate is due in the main to the spread 
of education and a higher standard of living, which everywhere tend 
to check child-bearing. Moreover, before the days of farm machinery 
children were more useful and could begin to pay their way at an 
earlier age. This is true on the whole in spite of an occasional task 
which a child can perform with machinery. It follows that just as 
laws raising the age of employment have been followed by a decline 
of the birth-rate among factory populations, so the introduction of 
machinery has tended to discourage large families on the farm, by 
postponing the period when the children could become economically 
useful. 

61. THE RURAL EXODUS 1 

By ROY HINMAN HOLMES 

The farmer class, which we have grown accustomed to consider 
the permanent foundation of our society, is showing decided signs of 
impermanence. The farmer is moving to town. It is not simply a 
farmer here and a farmer there, each because of reasons of his own, 
who are leaving the land and entering other occupations. The move- 
ment, instead, is general in extent. In a comparatively short time the 
typical farmer of today, who tills the land that he owns, with the help 
of his growing sons, will be but a national memory. 

Often it is charged that the rural schools of today are "educating 
away from the farm," and it is urged that their influence should be 
thrown against the cityward drift of the young. But a thought will 
convince anyone that the schools are no more influential in causing 
the sons of the farmer to leave the farm than they are in drawing 
the sons of the merchant away from the store, or in determining 
the lawyer's sons to turn from the occupation of their father. It 
is, perhaps, one of the chief functions of the school to broaden 
the vision of the student — to give him a world-view. The young 
man should be made to feel that the path his father chose, or was 
forced into by circumstances, is but one of many, and the school 
should aid the youth to determine what path he, individually, is best 
fitted to follow. It should no more be taken for granted that the son 
of the farmer should be a farmer than that the son of the physician 

1 Adapted from "The Passing of the Farmer," Atlantic Monthly, CX, 517-23, 






220 AGRICULTURAL ECONOMICS 

should be a physician. The learned professions are being constantly 
recruited from without. The son of the physician may go into busi- 
ness or become a civil engineer; there is no dearth of doctors, for 
other men's sons are studying medicine. 

On the other hand, the entrance of farmer boys into occupations 
other than that of farming is a very serious matter, indeed, for the 
reason that there is no corresponding movement of young men from 
the cities to the farms. Though the sons of farmers are among the 
most successful men in every walk of city life, it is comparatively 
rare to find a man not country-born who is a successful farmer. The 
city gates swing easily to admit the country boy; the city- trained 
lad finds it exceedingly difficult to swing them the other way. 

Though from the beginning of the rapid development of the cities 
there has been a constant movement of country people to them, the 
migration has been considerably accelerated since the improvement of 
rural schools, and the placing of high-school advantages within the 
reach of rural pupils, as has been done in many localities. The virtual 
extension of city school systems into the country districts, together 
with other modern phenomena, among which may be mentioned the 
rural mail system, the rural telephone, the improvement of highways, 
and the building of interurban lines, is in a large measure breaking 
down the barriers which formerly existed between the country and 
the city. The two civilizations, rural and urban, which had until 
recent years existed to a large degree independently of each other, 
are rapidly being blended into one. This new civilization thus 
formed is city-centered, and a strong pull toward the center is 
setting in. 

It is not alone the young people who are today drifting away from 
the farms to town. There is also a continued movement of older men 
with their families to the cities. Many farmers of middle age are 
entering other occupations, depending for a portion of their income 
upon the proceeds from the farms they have left. Many small towns 
are made up to quite an extent of a population of "retired farmers," 
many of whom are still in the prime of life. Instead of having 
remained at their task until their days of activity should have nor- 
mally ended, they chose to get away from it while they were still 
young enough "to get some enjoyment out of life." Like those early 
miners of gold who chanced to be successful, they, having gathered in 
their piles, next enter upon the stage of spending. The typical 
"retired farmer," however, differs very radically from the old-time 



HUMAN EFFORT AS A FACTOR IN PRODUCTION 221 

miner, in that, as his wealth was not the result of a sudden smile of 
fortune, he does not spend it in sudden moods of reckless generosity. 

The drift cityward is receiving a decided impetus in those country 
regions best provided with "city conveniences." Communities that 
had long existed as almost independent social entities, each having a 
center "at the Corners" where were located the church, the school- 
house, the store, and the post-office, have had their unity destroyed 
in these modern days. Formerly, frequent social gatherings were held , 
when the whole neighborhood would "turn out" — the women and 
children gathering in the afternoons, and the men, both old and 
young, joining them in the evenings. The sons of farmers married 
the daughters of farmers, and new farm homes were established, thus 
perpetuating the community. 

With the coming of improved methods of communication, new 
groups were soon formed, not on the basis of neighboring farms, but 
rather on the basis of a freer intellectual choice. Mere physical 
proximity has less than formerly to do with social grouping. The most 
intimate acquaintances of the farmer and his family often live in the 
village or the city several miles away. The sons and daughters of 
the farmer marry, and are married to, the daughters and sons of the 
city-dweller. Such marriages result, in the great majority of cases, 
in new homes established, not on the farms, but in the towns. This 
is but another way of saying that, with the coming of modern means 
of communication, so that the actual conditions of life both in the 
country and in the city are better understood by all than ever before, 
the attracting power of the city for the country-born is much stronger 
than that of the country for the city-born. 

62. THE BACK-TO-THE-LAND MOVEMENT 1 

"Back to the land" is an attractive slogan, and the clever phrase- 
maker who amended it to read "forward to the land" made it all the 
more appealing. Little wonder that the Man in Greasy Overalls or 
the modern Bob Cratchett who slaves under a green-shaded electric 
bulb should yield to its seductions. 

It had seemed of late that we heard less of this exhortation. But 
the war in Europe puts all the old problems in new postures, and 
several recent utterances give promise that we are to hear again the 
preaching of a landward crusade. Far be it from me to predict how 

1 Adapted from "The War and the Back-to-the-Land Movement," E. G. 

Nourse, North American Review, CCIII, No. 2 (February, 1916), 246-4S. 



222 AGRICULTURAL ECONOMICS 

rapid or how great a mobilization will take place when such a call to 
the colors shall be made. But one thing is evident: the sons of the 
city are not mere reservists of the army of the land. They may 
debate the summons, and are free to stay in their present callings 
unless persuaded that to enlist and serve would be to their advantage. 

A glance back over the period of the earlier agitation reveals the 
fact that, outside of violent personal enthusiasms (and everybody 
knows at least one farm "fan"), the summons was pretty generally 
refused. In spite of the high and rising cost of living, and in the face 
of a mighty exhortation to forsake the city and' make their fortunes 
on the farm, men persistently stayed in town. Those who engaged 
in painting the lily may have derived profit or satisfaction from the 
task, but the census enumerators have not been able to discover 
tangible results of their endeavor. 

To get at the facts of the matter we must go beneath its superficial 
manifestations. Of all the host who felt or feel the gnawings of land 
hunger, four classes are to be distinguished: those who yearn but do 
not go, those who move to the suburbs, those who go and return, and 
those who go and stay. The first class — the fireside farmers — do not 
swell the output of farm products. They increase the gate receipts 
at the land-show, the poultry-show, the dairy-show, and the stock- 
show, and levy toll upon the seed houses, poultrymen, and implement 
manufacturers, to whom they write for catalogues and information. 

The second class limit their operations to a kitchen garden and a 
chicken coop. Their hand-raised radishes do not demoralize the 
truck-growing industry, nor do the disappointing performances of 
their costly Orpington pullets seriously upset the egg market. The 
cost of the suburbanite's living may be a little lessened, but it entails 
extra work. For those who are willing to make the effort, there are 
more fresh vegetables, eggs, and spring chickens on the bill-of-fare 
and more fresh air and exercise for the family. 

Even from the other two classes of rural emigrants the net addi- 
tions to our agricultural population are much less than at first might 
appear. They create the illusion of progress by moving in a circle. 
The first group go to the country full of large hopes, only to find that 
profits do not come as easily with a hoe as with a pencil. Perchance 
the tyro farmer loses money alarmingly on his first experiments, or 
even if he makes some actual profit, it comes so much harder than the 
accustomed salary or pay-check that the game seems no longer to be 
worth the candle. Either nerve or resources may fail; there are even 






HUMAN EFFORT AS A FACTOR IN PRODUCTION 223 

cases on record where the issue was settled by a strike of the women 
or the children. The sweet and simple joys of the country sour into 
mere loneliness and an unimagined barrenness of days and nights — 
particularly nights. Many are the converts of the early exhortation 
who have already completed that enlightening but impoverishing 
round trip from the shop or office to the farm and back again. 

But not even all those who persist in their intention of becoming 
farmers, and who actually remain in the business, constitute a real 
addition to our farm population. Though a thousand city men 
become farmers, there is no gain to the country nor loss to the city if 
they merely replace a thousand farmers who sell or rent their farms 
and move to town — filling the jobs abandoned by the rural emigrants 
and living in the houses they vacated. Some expansion into new 
regions has been going on, of course, as growth of transportation or 
development of irrigation systems, drainage projects, and dry-farming 
methods have made other areas productive. Sometimes a larger farm 
has been broken up into smaller tracts, so that two or several men 
farm where one man farmed before. Absolute growth in both area 
and numbers has gone steadily on, but it is in the figures showing 
relative growth that the really significant facts are revealeff. The 
Thirteenth Census shows an increase of farm land of not quite 5 per 
cent, and improved land in farms of less than 15! per cent, while 
population increased 21 per cent. Cities grew three times as fast as 
rural districts. The percentage of our population to be found outside 
incorporated places of twenty-five hundred people or more, fell from 
58.4 per cent in 1900 to 53.7 per cent in 1910. 

B. Some Special Classes of Labor 

63. IMMIGRATION AS A SOURCE OF FARM LABORERS 1 
By JOHN LEE COULTER 

Agriculture has so long been looked upon as the dumping-ground 
of all surplus labor in case of city industries, of all poverty-stricken 
persons in case of famines, and all revolutionary individuals in case 
of disruption of European countries, that it is hard to realize that we 
have reached the state where farming in practically all of its branches 
requires a very high order of intelligence and the capacity to grasp 
and use a great variety of scientific facts. We may, therefore, say 

Adapted from The Annals, XXXIII (March, 1909), 373-79. See also 
selection 262 for a discussion of attempts to distribute immigrants. 



224 AGRICULTURAL ECONOMICS 

that, although it is true that we need farm labor very much, as a relief 
for current immigration agricultural distribution is not promising. 

There are two great classes of immigrants that can find room in 
various branches of the agricultural industry. The first class is com- 
posed of those from overcrowded agricultural communities in their 
home countries. On account of the high state of development of their 
industry they can teach us much which we have failed to take advan- 
tage of and which would result in the uplift of many of the sub- 
industries in agriculture in this country. These should be urged to 
bring with them their home industries and introduce new phases of 
agriculture into this country. The United States has been spending 
millions of dollars in introducing new plants, animals, and methods 
of farming from other countries. At the same time little groups of 
foreigners, such as the Swiss of Wisconsin or later the Italians in some 
southern districts, formerly thought of as the least desirable immi- 
grants, have settled in our midst and put into practice their home 
training, which has resulted in the establishing of great industries, such 
as the Swiss cheese industry. The class of immigrants most desired 
is, therefore, those who will add most to the industry they enter. But 
it is not necessary that the immigrants should introduce some new 
subindustry or be in advance of us in their methods in order to make 
them eligible to enter the agricultural industries. We may say as a 
general proposition that farmers from nearly any agricultural com- 
munity in Europe would be acceptable in some of the agricultural 
industries of this country. 

But it is not enough to encourage one class of immigrants and 
discourage or prohibit others. The immigrants must not only come 
from rural districts in their mother-country; if they are to succeed, 
they must be properly located here. Probably the most important 
single condition is that immigrants should be directed toward and 
urged to locate where their physical environment will correspond as 
nearly as may be to that of their mother-country. By that I mean 
that not only should the climate be nearly the same but the precipi- 
tation, the soils, and the topography should approach that of their 
former home if possible. Failure to satisfy these preliminary require- 
ments has resulted in almost complete failure or a long period of 
suffering, while attention to these factors has produced unpredicted 
successes. 

The next consideration of singular importance is that the social 
environment should be acceptable. If the agricultural operations 



HUMAN EFFORT AS A FACTOR IN PRODUCTION 225 

are not close to a city where others of the same nationality are 
employed in other industries it is desirable — almost necessary — that 
a considerable number be allowed, even induced, if need be, to settle 
in a community. At first they will live as in a world apart, but they 
give off ideas and take on others and at the end of a generation or two 
a few intermarriages will have broken down the hard-and-fast wall 
between settlements. Common markets, interchange of labor supply, 
contests between settlements, political and other conflicts, and back 
of it all the common-school system, soon result in an amalgamated, 
assimilated race. 

The next consideration which should be held in mind in deter- 
mining upon the distribution of immigrants among the different 
branches of agricultural industry is the economic status of the people 
to be distributed and their plans or ambitions for the future. Thus, 
some are independent laborers, others ready to become tenants, and 
still others to be landowners. Some plan to be employees as long as 
they stay; some of these would plan to save a snug fortune in a few 
years and return to the mother-country; others to earn and use the 
returns from year to year. Some plan to step up to the position of 
tenant and employer, others are ready to enter that state at once. 
Some are ready to become landowners and independent farmers by 
purchase of land in settled districts, others with less capital would go 
to the frontier with poorer markets and grow up with the country, 
enduring hardships but accumulating wealth. There is room for all 
of these classes of people in nearly all parts of the country. 

The extended successes accompanied by individual failures of the 
English-speaking peoples who early entered the agricultural industry 
of this country need not be expanded upon here. Neither will any 
detailed treatment of the extensive settlement by Germans in the 
North Central States during the last half-century be made. We may 
place the general influx of Scandinavians into Minnesota and the 
Dakotas in the same class and pass by all of these — which means the 
great bulk of immigrants of agricultural peoples — with the statement 
that they represent success and with the assumption that students 
of economics know of these classes and know of their successes. It 
is because we are too apt to stop at this point and say that other 
nationalities have little or nothing to offer that this paper is presented. 
The writer would emphasize the fact that we have room for farmers 
from many lands, assuming that we act intelligently in our choice and 
properly distribute those who come. 



226 AGRICULTURAL ECONOMICS 

The large Swiss settlement in Green County, Wisconsin, illustrates 
success in the introduction of a new subindustry of great importance. 
Having struggled for years trying to farm in the American way, these 
immigrants finally turned to the great industry of their home country. 
They had settled in a physical environment which was very much like 
what they had left abroad. Now several hundred cheese factories are 
prospering and millions of pounds of cheese are annually placed on our 
markets. Most of this is the famous Swiss cheese, and nearly all of 
those engaged in making this cheese and in buying and selling it are 
Swiss or of Swiss origin. The writer feels that this colony is a great 
success, is the kind of thing this country wants, is the basis of pros- 
perity in our agriculture, and must not be condemned because of the 
fact that broad Swiss is sometimes spoken or because the thousands 
of members of the district are not assimilated during the first genera- 
tion. The writer has found individuals and small groups of settlers 
from this colony and from "the old country" moving far up into the 
Northwest carrying with them the information and ambition to start 
other colonies as prosperous as the old one. The acquisition of such 
an industry is as valuable to this country as the introduction of a new 
plan that may have required the expenditure of a hundred thousand 
dollars. 

Turning from the prosperous Swiss district, we may direct our 
attention to a Bohemian center in northwestern Minnesota. The 
Swiss had sent explorers ahead to find a desirable location before com- 
ing to this country and settling down. The Bohemians were in no 
greater financial straits in their home country than the Swiss had been, 
but they were brought in and located by great transportation com- 
panies. The soil where the Bohemians were "dumped" is very good; 
but the country needs an expensive drainage system. The poor 
immigrants are not in a position to establish it. The result is that 
for some fifteen years we have had before our eyes a Bohemian colony 
numbering hundreds of people unable to establish a prosperous com- 
munity because of unfavorable natural conditions. These people will 
succeed in time, despite obstacles, but some common-sense assistance 
would hasten the day of their prosperity. 

In other parts of the United States large settlements of Bohemians 
of no higher standard are prosperous and happy. As an illustration 
of the status that should obtain the writer would refer to some of the 
very prosperous communities of Poles and Icelanders in North Dakota 
and elsewhere. No class of citizens, whether immigrants or descended 



HUMAN EFFORT AS A FACTOR IN PRODUCTION 227 

from immigrants half a dozen steps removed, could ask for greater 
material progress, better buildings — homes, churches, schools, and 
town buildings — than the Polish settlements around Warsaw, Poland, 
Minto, and Ardock in Walsh County, North Dakota. The writer's 
knowledge of this and other communities of like character leads him 
to say that to encourage such settlements is to foster prosperity and 
frugality as well as to place the stamp of approval upon a home- 
loving, land-loving class of farmers. If we pass on to settlements of 
Russians we may say nearly the same as above. 

Nor need we stop with the Swiss, Bohemians, Polanders, Ice- 
landers, and Russians. If we turn our attention to the Italians com- 
ing into the South we find them filling the various places demanding 
attention. There is a large demand for white labor, and the mass of 
Italians who do not intend to make this their life-home more and 
more fill a long-felt need. With the great numbers of Mexicans com- 
ing across the line for part of a season this demand may gradually be 
better and better satisfied. There is also a large demand for tenants, 
and this cry is being answered by Italians. These newcomers are 
not only fitting into the cotton-growing industry in competition with 
the colored people, but are proving their efficiency in vegetable and 
fruit farming. Of late years such settlements as that of Italians at 
Tontitown, Arkansas, in the Ozark Mountains, show also that Italians 
can bring their home industry with them and succeed here. They not 
only settle down as dignified farmers, but actually teach our farmers 
many things. Vegetables, apples, plums, grapes, and other fruits are 
successfully grown. If the colony located at Sunnyside, Arkansas, 
at an earlier date was a failure at first, it is no sign that Italians cannot 
succeed in agriculture. Immigrants, largely from other industries, 
placed in competition with negroes in production of a crop that they 
knew absolutely nothing about, under foremen accustomed to drive 
slaves, in a swamp country — hot and sickly to newcomers — attacked 
by malarial fever and losing a large number of the first settlers, it is 
not to be wondered at that failure was threatened. But success has 
come even in that case, where failure at first stared all in the face. 

With colonies like the Brandsville Swiss settlement in Missouri, 
with the Italians and Russians coming even into old New England, 
with Mexicans pushing up into the Southwest, and with other nation- 
alities gradually finding their own, we may indeed turn our attention 
toward the agricultural industry as a much-neglected held. The cry 
of "back to the land" will not go unheeded by immigrants who have 



228 AGRICULTURAL ECONOMICS 

come from farms in their mother-country if any reasonable amount 
of effort is put forth to "assist them to find themselves." 

Reference might also be made to the Jewish farm problems of the 
Middle Atlantic States, problems which have importance as far west 
as Wisconsin; and to the Japanese and Chinese agricultural labor 
problems of the far West and Southwest. There are possibilities here 
which few people have yet appreciated. The question of demand for 
seasonal agricultural labor and the possibilities of continual labor by 
passing from one industry to another in neighboring districts or fol- 
lowing the same industry from one part of the country to another 
are left untouched. 

64. ITALIANS IN AGRICULTURE 1 

Though the immigrants from Italy, since 1900, constitute a rela- 
tively large and increasing percentage of all immigrants to the United 
States, and although it is estimated that more than 60 per cent of them 
came from rural districts in Italy, comparatively few have become 
farmers in the United States. According to the Twelfth Census, a 
total of 293,424 male Italians over ten years of age of the first and 
second generations were engaged in gainful occupations. Of this 
number, only 18,227, or 6.2 per cent, were engaged in agricultural 
pursuits. 

The accompanying table gives the number and location of the 
principal Italian rural settlements in the United States east of the 
Mississippi River and in Missouri, Arkansas, Louisiana, and Texas. 
Besides these there are a few small groups of market gardeners near 
large cities in the East and others in the outskirts of western cities. 

The largest and oldest colonies in the East are those in south- 
eastern New Jersey, on the Pine Barrens. Both North and South 
Italians are represented at Vineland, and Hammondton is one of the 
largest and most promising South Italian farm colonies east of the 
Rocky Mountains. In New England, South Italians engaged in 
market gardening and truck farming near Providence, Rhode Island, 
at least as early as 1844. Market gardening has increased in im- 
portance, and this settlement has been augmented slowly by accre- 
tions from the industrial population in the vicinity. North Italian 
farmers have established a settlement near South Glastonbury, Con- 
necticut, not far from Hartford. The leading occupation there is 
fruit raising — peaches and apples. This is a good type of foreign 

1 Adapted from Reports of the Immigration Commission, Vol. I, 559-70. 



HUMAN EFFORT AS A FACTOR IN PRODUCTION 



229 



colony, established on comparatively sterile, forest-covered New 
England soil. The principal farm settlements of Italians in New 



State 



Rhode Island 
Connecticut . 
New York . . . 



New Jersey 

Alabama 

Arkansas 

Louisiana 

Mississippi. . . . 

Missouri 

North Carolina 

Tennessee 

Texas 



Wisconsin , 



City or Town 



Olney ville 

South Glastonbury 

Canastota 

Lyons and Clyde 

Albion 

Port Byron 

Geneva 

Oneida 

Hammondton and vicinity 

Vineland and vicinity 

Daphne 

Lambert 

Grade 

Sunnyside 

Tontitown 

Independence 

Kenner , 

Millikens Bend 

Shreveport 

Delta Region 

Gulfport 

Long Beach 

Bay St. Louis 

Knob view 

Marshfield 

St. Helena 

Valdese 

Memphis 

Paradise Ridge 

Arcadia 

AltaLoma 

Beaumont 

Bryan 

Dickenson 

Hitchcock 

Lamarque 

League City 

Little York 

Montague 

San Antonio 

Victoria 

Genoa 

Cumberland 



Approximate 

Number of 

Persons 



225 
375 

500 
1,000 

350 

300 

1,500 

475* 

2,000 

5, 000 

180 

60 

100 

576 

400 

1,200 

700 

28 

32 

508 

10 

30 

5o 

220 

30 

180 

300 

260 

60 

30 

125 

125 

1,700 

7So 

100 

i5 

25 

35o 

250 

130 

75 

245 

1,000 



*Farm laborers brought in for the season. 



York are in the western part of the state, along the Erie Canal, in a 
region of heavy muck soil, hard to clear but well adapted to vegetable 
growing. 



230 AGRICULTURAL ECONOMICS 

In Wisconsin, two rural settlements were investigated, aggregating 
somewhat less than 250 families. One of these is an old colony of 
North Italians at Genoa, near the Mississippi River, just south of La 
Crosse. It represents the type of colony that has practically ceased 
to grow by additions from without and whose members are as fully 
Americanized as their German and Scandinavian neighbors. The 
South Italian colony at Cumberland, Wisconsin, is a different type. 
It is of recent origin, established on uncleared land, with great pine 
and hard-wood stumps. The members are chiefly railroad laborers, 
with whom agriculture is an incidental occupation until the land is 
paid for. Paying for land with supplementary earnings from indus- 
trial labor is not new, but there are few more pronounced types of this 
on a community scale than that presented by the Cumberland colony. 

Reference has already been made to the fact that less than 7 per 
cent of Italian immigrants engage in agriculture, although it may be 
considered a safe generalization that more than one-half, perhaps 
two-thirds, of the Sicilians and other South Italians and one-fourth 
of the immigrants from Northern Italy were farmers or farm laborers 
abroad. It is also significant that the proportion of North Italian 
immigrants who have engaged in agriculture is much greater than the 
proportion of South Italians, although a much larger proportion of 
South Italians were farmers or farm laborers abroad. 

Substantially all Italian immigrants are poor and come to the 
United States to better their economic condition. The newcomer, 
therefore, must at once engage in some occupation that will give him 
immediate returns. He has no money to travel, and no capital; of 
necessity, he becomes a wage-earner. It is possible that many 
Italians, after gaining their economic independence and accumulating 
a little money, would become farmers if they knew where to buy 
small parcels of cheap land. The deterrent influences are the isola- 
tion of farm life, ignorance of the location of suitable farm lands for 
sale, lack of experience in American farm methods, and the somewhat 
tardy and uncertain returns from independent agriculture. 

Unless settled in communities, the Italians have not proved suc- 
cessful pioneer farmers; nor are the most of them engaged in extensive 
agriculture, where many acres and considerable equipment are neces- 
sary. In almost every instance they seem to succeed best when they 
live close together, cultivate small farms, and raise crops that require 
hand labor rather than expensive, complicated machinery. Their 
social instincts are strong, and these must be reckoned with when the 



HUMAN EFFORT AS A FACTOR IN PRODUCTION 231 

Italian is ready to buy a farm. It may be asserted that the primary 
reason for the Italian's choice of truck and vegetable gardening in 
preference to diversified farming is a social one : he can have both land 
and neighbors. Some have said that the Italian is a gardener here 
because he was a gardener in Italy. Doubtless his early farm prac- 
tice exerts some influence on his later choice, but investigation has 
plainly shown that a compact group of Italians can carry on success- 
fully almost any system of farming and that the isolation of a few 
families is likely to mean failure even in the midst of favorable natural 
conditions. The South Italians, especially; run in groups and follow 
a leader. 

Climate and physiography play a much smaller part in the ulti- 
mate success of Italian colonies than is generally supposed. South 
Italian colonies are found all the way from the pine lands of northern 
Wisconsin to the cane fields of Louisiana. While sentiment often 
has much to do with the choice of a location, it cannot be said that the 
success of the settlement at Genoa, Wisconsin, is due to the Alpine 
aspect of the topography rather than to the excellence of the soil and 
the favorable markets; nor that the fine North Italian settlers of 
Valdese, North Carolina, would not have made more progress in every 
way had they settled nearer markets and on level land where there 
was more fertility and less Swiss scenery. 

The Italians have introduced into agriculture little that is new, 
but in the North, in every instance, their communities have enriched 
and improved the land and increased the agricultural wealth of the 
surrounding neighborhood. They seem to love the land, and few 
farms in the localities studied have retrograded under Italian manage- 
ment. Ownership is the almost universal form of tenure in northern 
settlements of North Italians, and but few South Italians rent the 
farms they operate. Having once purchased a piece of land on time, 
the Italian works early and late to pay for it and make it productive. 
In numerous instances he has, by an incredible expenditure of labor, 
made productive land which native farmers considered worthless. 
When the native farmers in the older colonies have suffered from low 
prices and a general agricultural depression, Italians have been ready 
to purchase abandoned or semi-abandoned farms, often subdividing 
them and restoring their productiveness. This movement has not 
assumed significant proportions, so far as Italians arc concerned, but 
in New Jersey the further extension of the settlements seems likely to 
proceed by this means. 



232 AGRICULTURAL ECONOMICS 

At the South, the displacement of negro farm labor by the Italian 
has not yet attained significant proportions, quantitatively. The 
reports on the Sunnyside and the "delta" settlements make clear the 
Italian's superiority over the negro, and the high regard in which he 
is held by the cotton planter in almost every instance. Not many 
negroes have been displaced, but the greater efficiency of the Italians 
assures them places as share hands or renters as fast as they come to 
demand them. Nowhere are the Italians held in higher esteem as 
farm laborers than among the large cotton planters in the delta region. 
Here they are raising successfully and profitably a crop of which they 
knew nothing previous to emigrating and for which it cannot be said 
that they had any natural aptitude. The influx to the cotton belt 
is slow, but this sluggishness is not due to lack of encouragement on 
the part of the planters. There is little doubt that the immigration 
will continue, but at the present rate there is no immediate prospect 
of the Italian's forcing out the negro. There is also an increasingly 
large movement of Italians, mostly Sicilians, into the sugar-cane region. 

65. ASIATIC LABOR ON THE PACIFIC COAST 1 

Though a few thousand Armenians are found in the West, most 
of them in Fresno County, California, and perhaps a thousand Syrians 
in Los Angeles, most of the Asiatic immigration has been from Eastern 
Asia — China, Japan, Korea, and India. According to the census, the 
number of Chinese in the continental United States in 1900 was 
93,283. Of these, 88,758 were males and 4,525 were females. In all 
probability the number of adult males was somewhat larger than the 
figure reported, but it has become evident from the investigations of 
the Commission that the number of Chinese in the West has materially 
decreased within the last decade or so. 

The immigration of Chinese laborers to this country may be said 
to date from the rush to California in search of gold sixty years ago. 
Many engaged in unskilled work in mining, railroad building, salmon 
canning, and in domestic service, laundries, and shops. Of still 
greater importance, however, was their employment, beginning pre- 
vious to 1870, as hand laborers in the orchards, fields, hopyards, and 
vineyards of California north of the Tehachepi, and in the canneries 
and other establishments incidental to the conserving and marketing 
of the crops produced. They did most of the hand work, such as 

1 Adapted from Reports of the Immigration Commission, Vol. I, 654-82. 



HUMAN EFFORT AS A FACTOR IN PRODUCTION 233 

hoeing, weeding, pruning, and harvesting, in all localities in the cen- 
tral and northern part of the state in which intensive farming was 
carried on. Being inefficient with teams, and white men being avail- 
able for such work in most localities, they were practically limited to 
hand work. They found favor in many instances because of the fact 
that they provided their own subsistence where white men, if they did 
not live close at hand, would have to be provided with board. Lodg- 
ings were easily provided for the Chinese, who are less dissatisfied when 
"bunked" in small quarters than is any other race thus far employed 
in the West. 

The Chinese engaged in agriculture were very largely replaced by 
Japanese. The Chinese engaged in the growing of sugar beets were 
underbid and displaced by the more progressive and quicker Japanese 
and have all but absolutely disappeared from the industry. In the 
hop industry the Japanese underbid the Chinese as the Chinese had 
the white men. The same is true in the deciduous-fruit industry, 
though Chinese lease orchards and in almost every locality are 
employed in comparatively large groups on some of the older ranches. 
The largest amount of land is leased by them and the largest number 
of them are employed for wages in the orchards and on the large 
tracts devoted to the production of vegetables on the Sacramento 
and San Joaquin rivers. Migration from place to place for seasonal 
work has become rare. Moreover, as the Japanese have advanced, 
the Chinese have leased fewer orchards and withdrawn to grow vege- 
tables or have gone to the towns and cities. Though the number 
employed in agricultural work is by no means small, they are no 
longer a dominant factor in the labor supply and especially in that 
required for harvesting the crops. 

Until 1898 the number of Japanese immigrating to the continental 
United States had never reached 2,000 in any one year. From 1899- 
1900 to 1906-7 the number varied between 4,319 and 12,626 per year, 
and from the beginning of 1902 to the end of 1907, 37,000 came from 
the Hawaiian Islands to the mainland. The influx of Japanese 
laborers has been controlled and reduced to small proportions during 
the last two years by a series of measures which permits the greater 
part of the administrative problem to rest with the Japanese govern- 
ment. 

Like the earliest immigration of the Chinese and the present 
immigration of most of the south and east European races, the 
majority of the Japanese immigrants have been of the agricultural 



234 AGRICULTURAL ECONOMICS 

class — small farmers, farmers' sons, and a few farm laborers. Several 
circumstances have militated against the success of Japanese in indus- 
trial pursuits, and many who found their first employment in the 
canneries and as section hands and general construction laborers have 
shown a strong tendency to leave such employment for agricultural 
work or for occupations in the cities. It may be said further that 
none of these industries, save salmon canning, has been materially 
assisted by or has become dependent upon Japanese labor. With the 
beet-sugar industry in several states and certain other agricultural 
industries in California it is different, for the farmers in many 
localities have for years relied upon Asiatic labor until a situation has 
developed in which the substitution of other races will involve incon- 
venience and will require radical changes in order to make the 
necessary adjustment. 

In 1909 it is probable that not far from 30,000 Japanese were 
engaged in agricultural pursuits in California during the summer 
months. As laborers they occupy a dominant position in most of the 
intensive, specialized agriculture which has come to prevail, and espe- 
cially in that which involves much hand work and is seasonal in char- 
acter. The Japanese do practically all the hand work in the berry 
patches, two-thirds of that in the sugar-beet fields, perhaps one-half 
that in the vineyards, and a somewhat smaller part of that in the 
fields devoted to raising vegetables and in the orchards. In the hop- 
yards they do not generally predominate except in the training and 
care of the vines and in picking in some localities, while on general 
farms they find little employment. On farms conducted by white men 
they do very little of the work with teams and have as their share the 
smaller part of the hand work in vineyards and orchards except during 
the busiest seasons, whether during cultivation or harvest, when they 
occupy a much more conspicuous position, and their dominancy is in 
part due to this fact. 

Because of differences of climate, elevation, and soil, much spe- 
cialization in farming has developed where the problems of transpor- 
tation and labor could be solved. First the Chinese and then the 
Japanese have been organized and easily moved from one community 
to another, so that no great restriction has been placed upon a spe- 
cialization which has called for many laborers at one time and rela- 
tively few at another. Many California communities have a degree 
of specialization in agriculture which makes it necessary to induce 
many persons to come from other localities to assist for a time in the 



HUMAN EFFORT AS A FACTOR IN PRODUCTION 235 

farm work. The need is made all the greater by the fact that in 
marketing the products frequently much additional labor is required 
to "man" packing houses, canneries, or wineries. At Vacaville 
4,000 persons must come from other localities to assist in picking, 
packing, and drying the fruit. At Watsonville 2,000 laborers are 
required from other localities to assist with the strawberry and apple 
harvests, which are separated by a period of many weeks. At 
Fresno from 3,000 to 4,000 extra laborers are needed for three weeks 
in the autumn to harvest the raisin grapes, while others are required 
in the packing houses and wineries. About Oxnard for several weeks 
2,000 extra men are needed. Instances are fairly general of a speciali- 
zation by communities which requires for a time a labor force larger 
than that which is normally supported by the community. The prob- 
lems thus indicated the Chinese and Japanese have solved. They are 
accustomed to hand labor, have usually been without family, and 
could easily migrate from one community to another; have been 
provided with comparatively cheap lodgings and have boarded them- 
selves, when white men, as a rule, must be provided with board; and 
have been organized so that it was possible for the grower to secure 
the number of men desired, and have them supervised and paid off 
and discharged, as a group, by the "boss" of their own nationality. 

The Japanese agricultural laborers were at first almost all of the 
migratory class engaged in seasonal work only. Gradually, however, 
an increasing percentage of them have found employment in the same 
locality throughout the year. A small percentage, also, as among the 
Chinese, have come to engage in occupations requiring work with 
teams. Most of these, however, are farming for themselves or are 
employees of farmers, for among the Japanese, as well as Chinese, 
Italians, and Portuguese, there is a strong tendency to employ only 
persons of their own race to fill all positions. 

Within ten years the Japanese have become conspicuous as 
farmers. In California, according to the returns made to the secre- 
taries of Japanese associations, which, where checked, have been 
found to be approximately correct, the members of this race in 1909 
owned 16,449^ acres °f agricultural land and leased 137,233! more, 
80,232 acres of it for cash and 5 7, 001 J for a share of the crop. This 
does not include so-called "contract leases," where a part of the work 
involved is covered by a contract for the season or a period of years. 
The amount of land controlled by Japanese in several other states 
in the West was in 1909 approximately as follows: Colorado, 20,000 



236 AGRICULTURAL ECONOMICS 

acres; Idaho, 7,072; Utah, 6,000; Washington, 7,000; Oregon, 3,500; 
more than 90 per cent of it being under cash or share lease. 

Though in many localities the Japanese were at first received with 
great favor, widespread dissatisfaction with them is now found and 
they are almost always disparagingly compared with the Chinese, who, 
because they are careful workmen, faithful to the employer, uncom- 
plaining, easily satisfied with regard to living quarters, and not 
ambitious to learn new processes and to establish themselves as in- 
dependent farmers, are used in the older agricultural districts as the 
standard by which others are measured. Though many ranchers think 
that for social reasons it would be a mistaken policy to readmit the 
Chinese, they generally regard Asiatic laborers as indispensable to 
the prosperity and expansion of the agricultural industries which have 
become predominant, and their almost unanimous preference is for 
Chinese rather than any other Asiatic race. 

The immigration of East Indian laborers may be said to date from 
1905, and the number of such laborers in the United States July 1, 
1 9 10, may be estimated at 5,000 or perhaps a little more. About 85 
per cent of these are Hindus wearing the turban; the others are 
Mohammedans or Afghans. Of 473 East Indians from whom personal 
schedules were obtained, 85 per cent had been farmers or farm 
laborers in India. While many of them have been employed for a 
time on rough work in lumber yards, railroad construction, or as 
section hands, most of them have drifted into agricultural work in 
California, where there has been the greatest dearth of cheap labor 
because of the extension of specialized farming and fruit growing and 
the diminishing number of Chinese and Japanese available as wage 
laborers for seasonal work. In 1908 they made their appearance in 
orchards, vineyards, and sugar-beet fields, and on the large farms 
devoted to the production of various kinds of vegetables in northern 
and central California. In 1909 three small groups made their 
appearance in southern California. Their work has been of the most 
unskilled type, and limited to hoeing and weeding in field and orchard, 
and to harvesting of grapes, fruit, and vegetables. In only one or two 
instances were they found to have been employed with single-horse 
plows. In the Newcastle fruit district and along the Sacramento and 
San Joaquin rivers, where a large part of the land is leased by Asiatics, 
they have found employment without much difficulty because of 
widespread desire to break the monopoly control of the labor supply 
by the Japanese or because of the much higher wages than formerly 



HUMAN EFFORT AS A FACTOR IN PRODUCTION 



237 



commanded by other Asiatics. In 1908 their wages varied from 25 
to 50 cents per day less than was paid to Japanese. This difference 
has tended to disappear, however; for the East Indians, when they 
have found employment in a community, have demanded as high 
wages as were paid to other Asiatics. Though in some instances they 
have commended themselves to ranchers, they have generally been 
regarded as distinctly inferior to laborers of other races and as not 
cheap labor at the wages which they have been paid. Usually they 
have done the work not desired by other races or have been employed 
when other laborers were not available at the customary or even a 
higher wage. 

66. STATISTICS OF NEGROES IN AGRICULTURE 1 

The accompanying table presents the principal statistics of agri- 
culture for negro and for white farmers in 19 10 and in 1900 for the 
United States as a whole. 

TABLE I 





Farms: 1910 and 1900 




1910 


Percentage Increase:* 
1900-1910 




Farms 

Operated by 

Negroes 


Farms 

Operated by 

Whites 


Farms 
Operated 

by 
Negroes 


Farms 
Operated 
by Whites 




893,370 

42,279,510 
47-3 

27,845,190 
31.2 

218,972 

672,964 

1,434 

$1,141,792,526 


5,440,619 

832,166,020 
1530 

449,418,265 
82.6 

3,707,501 

1,676,558 

5 6 ,56o 

$39,712,214,845 


19.6 

10.6 


9 5 


Acreage, total 








19.2 








Tenure: 


16.6 

20.8 

-17.8 

128.4 


7-6 


Tenants 








Value; 
Total 








Land 


756,158,264 
166,559,439 
34,178,052 
184,896,771 

1,280.75 
27.01 


27,6i5,5i5,334 
6,148,876,853 
1,227,407,744 
4,720,414,914 

7,299.21 
47.72 


133-2 
131-6 
81.2 
117. 7 

91-3 
106.9 


H7-3 


Buildings 


76.7 


Implements and machinery 

Live stock 


6S.4 
58.6 


Value per farm 


82. > 











* A minus sign ( — ) denotes decrease. 

^rom "Negroes in the United States," 
Department of Commerce, pp. 36-39. 



Bulletin l2Q t Bureau of the Census, 



238 AGRICULTURAL ECONOMICS 

There were 893,370 negro farm operators in 1910 and 5,440,619 
white farm operators, the negro operators forming 14 per cent of the 
total number, a considerably greater proportion than the proportion 
of the negro population to the total population of the United States, 
which was 10.7 per cent. The number of negro farm operators 
increased 19.6 per cent between 1900 and 1910, while the number of 
white farm operators increased 9 . 5 per cent. 

The total acreage of farms operated by negroes was 42,279,510 
in 1910, the average per farm being 47.3 acres, as compared with an 
average of 153 for the farms operated by whites. The average 
improved acreage of negro farms was 31 . 2, as compared with 82 . 6 for 
farms operated by whites. 

The total value of farm property operated by negroes in 1910 was 
$1,141,792,526; in 1900 the same item was $499,941,234, so that there 
was an increase of 128 . 4 per cent during the decade, while the value of 
farm property operated by whites increased 99 . 6 per cent. The value 
of implements and machinery on farms operated by negroes increased 
81 . 2 per cent during the ten years 1900-1910, the value of live stock 
increased 117. 7 per cent, the value of buildings 13 1.6 per cent, and 
that of land 133 . 2 per cent. The difference in the rate of growth 
between farms operated by negroes and by whites is greatest when 
value of live stock is considered, the rate of increase being only 58. 6 
per cent on farms operated by whites, as compared with 11 7. 7 per 
cent on those operated by negroes. 

The average value of farms operated by negroes in 1910 was 
$1,280.75, as compared with an average of $669.52 for 1900, and of 
$7,299 .21 for farms operated by whites in 1910; the average value of 
farm property per acre was $27.01 on farms operated by negroes in 
19 10, as compared with $13 . 08 for 1900, and $47 . 72 for farms operated 
by whites in 1910. 

Of the 678,118 colored farm tenants, more than one-half, 373,551, 
were share tenants; 14,623 were share-cash tenants; 264,443 were 
cash tenants; and for 25,501 the nature of tenancy was not reported. 
The number of colored share and share-cash tenants combined 
increased 36.3 per cent between 1900 and 1910, while the number of 
colored cash tenants and unclassified tenants combined increased 5 . 6 
per cent. It is fair to say, therefore, that share tenancy is the pre- 
dominant form of agricultural tenancy for colored farmers and appar- 
ently its numerical importance is increasing. 



HUMAN EFFORT AS A FACTOR IN PRODUCTION 



239 




240 



AGRICULTURAL ECONOMICS 




HUMAN EFFORT AS A FACTOR IN PRODUCTION 



241 



In Table VI the number of farms and the value of farm property 
operated by negroes in southern states are given for 19 10 and for 1900, 
with the increase for the decade and rank of the states at each census. 

TABLE VI 





Farms in the South Operated by Negroes 


State 


1910 


1900 


Increase* 
1900-1910 


Percentage 
Increase:* 
1900-1910 


Rank of 
States 




1910 


1900 




Number of Farms 


Southern states 


880,836 


732,362 


148,474 


20.3 












Mississippi 

Georgia 


164,488 

122,554 

110,387 

96,772 

69,816 

64,456 

63,578 

54,8i9 

48,039 

38,300 

14,698 

13,209 

11,709 

6,370 

922 

707 
12 


128,351 
82,822 
94,069 
85,38i 
65,472 
53,996 
46,978 
58,096 

44,795 
33,883 
13,521 
6,353 
11.227 

5^42 

817 

742 

17 


36,137 
39,732 
16,318 
H,39I 
4,344 
10,460 
16,600 

- 3,277 
3,244 
4,417 
i,i77 
6,856 

482 
528 
105 

- 35 

- 5 


28.2 
48.O 
17-3 
13-3 
6.6 

19.4 
35-3 

- 5-6 
7.2 

13.0 

8-7 
107.9 

4-3 

9.0 

12.9 

4-7 

- 29.4 


I 
2 

3 
4 
5 
6 

7 
8 

9 
10 
11 
12 
13 
14 
15 
16 

17 


1 

4 

2 


Alabama 


South Carolina .... 
Texas 


3 
5 

7 
8 


North Carolina 

Arkansas 


Louisiana 


6 


Virginia 


9 
10 
11 


Tennessee 

Florida 


Oklahoma 

Kentucky 

Maryland 

Delaware 


13 
12 

14 
15 
16 

17 


West Virginia 

Dist. of Columbia. 




Value of Farm Property 


Southern states 


$1,083,658,351 


$469,506,555 


$614,151,796 


130.8 












Mississippi 

Georgia 


187,401,976 

157,870,357 
118,314,985 
111,853,611 
97,261,114 
87,119,083 
78,675,830 
56,472,403 
54,651,043 
54,073,706 
30,347,738 
18,252,353 
15,365,896 
12,249,019 

2 ,350,845 
1,304,721 

93,671 


86,390,974 
48,698,931 

43,992,879 
56,180,207 
46,908,811 
34,191,174 
28,458,176 

37,995,093 

24,490,106 

26,735,588 

7,3i3,i56 

10,950,268 

6,466,487 

8,208,572 

1,393,830 

827,711 

304,592 


101,011,002 

109,171,426 

74,322,106 

55,673,404 

50,352,303 
52,927,909 

50,217,654 

18,477,310 

30,160,937 

27,338,118 

23,034,582 

7,302,085 

8,899.400 

4,040,447 

957,oi5 

477.010 

-210,921 


116 
224 
168 

99 
107 

154 
176 

48 
123 
102 

3i5 
66 

137 
40 
68 

57 

-69 


9 

2 

9 

1 

3 
8 

5 
6 

3 


7 
6 

7 
6 


1 
2 
3 
4 
5 
6 

7 
8 

9 

10 
11 
12 
13 
14 
15 
16 

17 


1 
3 
5 
2 


South Carolina .... 
Texas 


Alabama 


4 

7 
S 
6 


Arkansas 


North Carolina 

Louisiana 


Virginia. . . 

Tennessee 

Oklahoma 

Kentucky 

Florida 

Maryland 

Delaware 

West Virginia 

Dist. of Columbia . 


10 

9 

J 3 

11 

14 

12 

15 
16 



*A minus sign ( — ) denotes decrease. 



242 AGRICULTURAL ECONOMICS 

67. DECLINE IN WOMEN'S WORK 1 
By GEORGE K. HOLMES 

The outdoor labor of women on farms has undergone immense 
reduction within a generation or two. In 1871 this department 
investigated the subject in all parts of the country, with results that 
may be found in the report of the Commissioner of Agriculture for 
1 87 1. The summary of that investigation is printed below: 

In New England very little regular labor in the fields is performed 
by women. The variety of indoor employments is such as to furnish 
work of a light and varied character, requiring every degree of skill. 
Yet in haying, laborers being scarce, the wives and daughters of 
farmers sometimes aid in spreading and raking hay. In planting, in 
a few cases girls are wont to aid in "dropping" corn or other seeds 
planted in hills or drills. 

Women sometimes assist in milking, but not so generally as in 
former generations. In the care of poultry they still have by far a 
greater share. One report states that in some districts in Vermont 
one- twentieth of the farm work is done by women. In Lincoln 
County, Maine, the correspondent writes that "female outdoor labor 
is unknown — incompatible with New England institutions." 

Girls are almost exclusively employed in hop picking wherever 
hops are grown, their nimble fingers rendering them superior to men 
or boys; but they usually receive but one-fourth the wages of men 
in the hopyard. In Barnstable County, Massachusetts, the work of 
setting out cranberry vines, weeding them, and picking the fruit is 
mostly done by women, and they obtain for setting and weeding 
10 to 12 cents per hour, the same rate paid, to men, and ij to 2 cents 
per quart for picking, in which they average i| bushels per day. 
Women are more efficient than men at this labor. 

Canadian women, and occasionally Irish, hire out or work on 
shares in different parts of New England, though the number employed 
is not large, and they will undertake nearly all kinds of farm work. 
"Many of them are as smart as the men," but as a rule they are less 
efficient and receive proportionately less pay. 

Similar customs prevail in New York, comparatively little out- 
door service being rendered by American-born women. In tying 
hopvines and picking hops, in which celerity in digital manipulation 

1 Adapted from "Supply of Farm Labor," Bulletin g4, Bureau of Statistics, 
United States Department of Agriculture, 1912, pp. 27-28. 



HUMAN EFFORT AS A FACTOR IN PRODUCTION 243 

is a winning accomplishment — an occupation that is substantially 
an industrial picnic — they are universally preferred and are paid 
"by the job," or according to the measure of work done. In picking 
grapes and other fruit, and in packing fruit for market, they excel, 
and in some districts find agreeable employment in such service. 

Most of the berries of New Jersey, grown so extensively for the 
markets of New York and Philadelphia, are picked by girls and women 
at a given rate per quart, and they often make more than men at the 
same employment. 

In many districts of Pennsylvania very little outdoor employment 
is undertaken by women, while in others, especially in those less 
improved, or with a large foreign element in the population, much and 
various farm work is done by women. In Butler County, which has 
a large immigrant element, "the women assist in every outdoor 
operation in which they can make themselves useful, so far as their 
spare time from the kitchen and dairy will permit, while their com- 
fortable homes show that they do not neglect their household duty." 
These immigrants "not only do not lose their habits of industry, but 
are stimulated by the prospect of being able to accumulate enough 
to educate their children and for sickness and old age." Agricultural 
machinery is reducing the proportion of female labor required in har- 
vesting, yet a woman may occasionally be seen driving the teams 
which are the motive power in reaping and mowing, and one who can 
bind or gather grain with celerity and skill is not difficult to find. 
The assistance of women in outdoor work is enjoyed in Delaware, 
especially in "saving corn fodder," which is much used as a substi- 
tute for hay, and in picking peaches for market. The wages paid to 
women is said to be three-fourths of the rate allowed to men, and 
"their efficiency is in the same ratio." 

Among the poorer classes of whites in some counties in Maryland, 
the Germans especially, the women assist in such labor as planting, 
hoeing corn, weeding tobacco, and raking grain. Sometimes they 
obtain men's wages, but usually about three-fourths as much. In 
such work they are often quite as efficient as men. Negro women 
have been accustomed to all kinds of farm labor, though generally 
employed in the lighter branches. 

Women assist in farm labor to a very limited extent in Virginia. 
Since the war, negro women object to field work. Very generally, 
however, the "small farmers" have occasional assistance from wives 
and daughters in most of the branches of service enumerated in the 



244 AGRICULTURAL ECONOMICS 

record of woman's work in other states. They are especially useful 
in " worming, suckering, and stripping tobacco," often more efficient 
than men, but receiving only one-half to two-thirds as much pay. In 
some counties full wages are paid for work in planting and gathering 
corn; full pay is often given binders in the wheat harvest who can 
keep up with the reaper. In Nelson County, "some are expert at 
crating and seem pleased with it, regarding it as more or less of a 
frolic." 

Through the southern states a large portion of the females among 
the negroes were accustomed to general farm labor, most of whom 
now decline it, appearing to regard it as a relic of slavery and not 
"suited to ladies." It is stated of some states that not more than a 
fourth part as many do outdoor work as formerly. 

White women in North Carolina, to a limited extent, render assist- 
ance to husbands and fathers who do their own farm work. In some 
districts of South Carolina it is said that "20 per cent of the farm 
labor is performed by women, black and white." On an average they 
are not paid more than half the wages of men, and their efficiency is 
in the same ratio. 

Very little farm work is done by women in Georgia, the women 
never hiring out, except in some instances at cotton picking. Yet 
there are instances reported, as in Cherokee, in which "a few widows 
manage their farms without any adult males to help; and they plow, 
hoe, harvest, bind, and gather their crops, shear sheep, and carry on 
all farming operations." Similar cases are found in all the Gulf states. 
In the harvesting of the cane, and in the operations of sugar making, 
female labor is found efficient; while, in another state, a crusty 
bachelor maliciously hints that the agricultural occupation preferred 
by women in his state is "raising Cain." 

A large portion of the gardening of Duval County, Florida, is 
done by women. In Louisiana, Mississippi, and Alabama white 
women upon small farms assist in field occupations more than formerly. 
Picking cotton is preferred, and when women are employed for wages 
the pay is proportionate to the work accomplished. Occasional aid 
in the light work of the farm, as cotton seeding or cotton picking, is 
given in Texas, Arkansas, and Tennessee. 

Among the rich lands and large farms of Kentucky very little out- 
door work' is done by women, either white or black; but in the less 
opulent hill regions white women do more farm work and black 
women less than formerly. In Missouri, where the same general 






HUMAN EFFORT AS A FACTOR IN PRODUCTION 245 

statement holds good, it is said that "one woman in a garden or at 
the sorghum kettle is considered equal to two men." 

Very little farm work is done by native American women in all the 
states of the Ohio Valley and the Lakes, that little being casual 
assistance in emergencies as a matter of convenience and sometimes of 
necessity, as is reported of all other sections of the country. Garden- 
ing and fruit picking are preferred, and hop picking where hops are 
grown. Immigrants do more outdoor work, "especially for a few 
years after coming here. As they become more Americanized they 
work less on the farm." "They do all kinds of farm work," says a 
correspondent in Wisconsin, "and many kinds as well as the men." 
As hop pickers in the Northwest they are preferred to men and secure 
the same pay, but for most farm work do not receive more than one- 
half to two-thirds of the wages of men. 

In Minnesota female immigrants work extensively in all branches 
of farming. "In binding and shocking grain, some of them are equal 
to the best of men." Some of them, in time of scarcity of labor and 
high rate of wages, have received $2.50 to $3.00 per day, when male 
laborers obtained $3 to $3 . 50 per day. 

In Kansas the kitchen garden is generally in charge of the mistress 
of the farmhouse. But when employed for wages, women get about 
the same as men for the same amount of work, though this is not 
invariably the case. In some counties of Nebraska no outdoor work 
of women is reported; in others much is done in haying and harvesting ; 
some can bind as much wheat as men, "though they cannot bind it 
so tightly," in which cases they get the same pay for it. A corre- 
spondent says, "The day has passed in progressive Nebraska for the 
'weaker vessel' to get less pay than men for the same work." In 
Utah it is claimed that women do not generally work out of doors. 
One report admits that women assist occasionally at harvest, and that 
they receive half the rate of wages paid to men. Less farm work is 
done by women in the Pacific states than elsewhere, on account of 
their comparative paucity of numbers. 

With regard to very recent years census statistics of female agri- 
cultural labor afford no satisfactory conclusions. A general knowl- 
edge of farming conditions throughout the country, past and present, 
is more definite. Farmers' wives and daughters no longer milk the 
cows and work in the field and care for the live stock. They do not 
work in the kitchen garden as much as before, nor assist so much in 
fruit and berry harvest; they are making less butter, and choose 



246 AGRICULTURAL ECONOMICS 

making on the farm has become a lost art. They may care for the 
poultry and the bees, do housework and gather vegetables for the 
table, and cook and keep the dwelling in order. Their domestic 
work is substantially the limit of their work on the farm. 



C. The Question of Efficiency 

68. WHAT THE FARMER NEEDS TO KNOW 1 
By G. F. WARREN 

Some persons, who may succeed well in the very specialized call- 
ings in the town or city, may not be qualified for farming, for farming 
calls for such versatile ability. The farmer is a combination of busi- 
ness man, mechanic, naturalist, and laborer. 

In the days of our fathers the measure of the farmer's success was 
his ability to raise his own food and clothing rather than his ability 
to organize his business and buy and sell. But today the farmer no 
longer supplies his own needs. He sells most of his products and 
buys most of his necessities. Not only must he have money to buy 
the innumerable necessary things for his living and equipment, but 
land, which was once to be had for the asking, is now dear. All these 
changes mean that the farmer has become a business man. The kind 
of business ability needed is not so much that of the trader as of the 
executive who can organize a farm into a successful business enter- 
prise. The idle horse in the barn is a more frequent source of loss 
than is the bad bargain in buying a horse. More farmers fail because 
of poor farm management than because of poor production. 

Mechanical ability has always been desirable for a farmer, but in 
the last twenty years the great increase in the number of complicated 
machines has made this ability of much more importance than 
formerly. Grain and corn binders, manure spreaders, potato diggers, 
gasoline engines, and all the other new and expensive machines call 
for mechanical ability if they are to be used efficiently. There is 
something to farming besides taking a pleasure drive with a team of 
fine horses on one of these machines. A little carelessness or inexpe- 
rience may cause a loss of more than a month's wages. Occasionally 
a farmer can depend upon hired men for his mechanical ability, but 
usually he must not only be the mechanic, but must instruct the men 

1 Adapted from Farm Management, pp. 1-5. (Copyright by the Macmillan 
Co.) 



HUMAN EFFORT AS A FACTOR IN PRODUCTION 247 

and guard against their carelessness. There are still some kinds of 
farming in which machinery is little used, but more and more the 
farmer-mechanic with his machine is replacing the hand laborer. 

The farmer has ever been a naturalist. He used to conspire with 
the moon and the almanac to coax nature to yield a bountiful harvest. 
Today he may learn from the experiences in other states and countries 
and from scientific investigation. If a farmer is to compete with his 
neighbors, he must study the science of plant and animal production. 
If he takes a keen delight in watching plants and animals thrive it 
will add much to his pleasure and, if tempered with good judgment, 
will go far toward bringing success. 

A generation ago the farmer was primarily a laborer. His few 
machines were all muscle testers. Physical strength and physical 
skill were among the greatest assets, and they will always be important 
considerations for the farmer. The prospective farmer who is skilful 
with his hands and likes to do manual labor has two of the very 
desirable traits for a farmer. 

69. FARMING DEMANDS EXPERIENCE AS WELL AS 
KNOWLEDGE 1 

By G. F. WARREN 

Many persons, who are not closely in touch with farming, believe 
that the introduction of machinery has done away with the necessity 
for strength and skill in manual operations. Few people realize how 
hard it is to acquire this manual skill. The writer has had an 
opportunity to see the efforts of many city persons, and has been 
surprised to see how difficult it is to acquire manual dexterity. The 
children on the farm learn by years of practice. It takes thousands 
of efforts for the boy to learn to throw a baseball straight. Apparently 
it is just as difficult to learn to pitch hay. If this skill is acquired by 
ten years of practice in childhood, little is thought about it, but if it 
is to be acquired by a mature man, it is a serious undertaking. Milk- 
ing, using a saw, using an ax, and a thousand other manual operations 
are hard for a grown person to learn; but if one has been used to 
manual labor so that he has trained muscles, new operations are not 
so difficult. Grown persons who have never learned to do manual 
work of any kind rarely become successful farmers. The time to 
train the muscles is when they are young. 

1 Adapted from Farm Management, pp. 4-7. (Copyright by the Macmillan 
Co.) 



248 AGRICULTURAL ECONOMICS 

A successful engineer would not expect to buy a bank and become 
a successful banker without some experience in the business, yet many 
men feel that since they have made a success in the city they can 
start farming without any experience and expect to make a profit at 
once. There is probably no occupation in which experience is more 
necessary and in which so much time is required to obtain the experi- 
ence. City industries are very specialized. Farming calls for experi- 
ence with weather, diseases, insects, plant feeding, animal feeding, 
breeding, machinery, business affairs, and a hundred other things that 
it takes time to learn. The only safe way for an inexperienced man 
to begin farming is by working for a good farmer. If one begins for 
himself, he should put his theories into cold storage and follow the 
practice of the most successful neighbors as closely as possible for the 
first few years. Even then he will make mistakes enough. The worst 
mistake of all is to assume that the farmers are all ignorant and 
unbusinesslike. They are the fathers and brothers of our mighty 
"captains of industry" and are usually as efficient for their conditions 
as the successful city man is for his. Inexperience is so serious a 
handicap that farmers are very loath to hire anyone from the city 
except for very simple kinds of work, as picking fruit, picking up 
potatoes, weeding, and similar tasks. 

If one desires to have a chance to learn all phases of farming, he 
should not expect much pay until he becomes of use. If an inexpe- 
rienced person is allowed to use machinery and take care of stock and 
crops, the farmer is almost certain to have serious losses, unless he 
has another person to watch the beginner almost constantly. 

70. MACHINERY NOT ENTIRELY A SUBSTITUTE FOR LABOR 1 
By CARL W. THOMPSON and G. P. WARBER 

The importance of the increased use of machinery has been dis- 
cussed. Attention has been called to the changes wrought by the 
introduction of such labor-saving devices as the self-binder, hay- 
loaders and stackers, self-feeders, and gasoline engines for pumping, 
churning, and washing, until it is believed by many people that 
machine processes have become so extended that the present-day 
farmer has but to sit around all day with a wrench and oil-can in 
hand, from the time he starts the milking machine going in the morn- 

1 Adapted from Social and Economic Survey of a Rural Township in Southern 
Minnesota, University of Minnesota Studies in Economics, No. 1, pp. 8-1 1. 



HUMAN EFFORT AS A FACTOR IN PRODUCTION 249 

ing until he turns off the switch of his electric power and lighting 
system at night. Although it is true that much of the heavy work 
on the farm has been made easier by the use of such machinery as the 
self-binder, the self-feeder on threshing machines, the manure 
spreader, and the riding plow, there are still many onerous tasks left. 
Machinery has influenced farm work greatly, but so also has the 
increase of live stock. This has made farm life more restraining and 
exacting. 

We thus see how the increase of live stock on the farm represents 
an increase in the kind of work that cannot be reduced to machine 
process. But few people realize the importance of this labor situation 
as it presents itself to the farmer today. The census reports indicate 
how there has been a general increase of hired help in live-stock farm- 
ing districts. In this township 15 per cent of the farmers had hired 
help by the year, 9 per cent had help by the month over four months 
but less than a year, 8 per cent by the month less than four months, 
and 34 per cent hired day labor. Of the total number of farmers 23 
per cent found it their " biggest problem .to get satisfactory help." 
There is more and more of a demand for the kind of laborers upon 
whom the farmer may depend absolutely. Besides physical strength, 
the present-day system of farming demands a willingness to work 
irregular hours and a genuine personal interest in the work on hand. 
Farmers who keep pure-bred dairy herds must have help the year 
around; and any kind of hired help will no longer do. The farm 
laborer must be a man who is painstaking and gentle in working with 
the herd. There is so much in this alone that some of the best 
breeders say "no milking machine, however perfect it may be mechan- 
ically, will ever be able to replace the human hand, just because of the 
productivity due to the friendly relation between the cow and the 
milker." Thus it is that, in the opinion of many, "the hired-help 
problem is the biggest problem confronting the farmer." 

71. VOCATIONAL TRAINING IN THE RURAL HIGH SCHOOL 1 
By R. W. STIMSON 

Agricultural education as a phase of vocational education is that 
form of vocational training which fits for the occupation connected 
with the tillage of the soil, the care of domestic animals, forestry, and 

1 Adapted from "The Massachusetts Home-Project Plan of Vocational Agri- 
cultural Education," Bulletin of the United States Bureau of Education, 1014. No, S. 
PP. 9-i9. 



250 AGRICULTURAL ECONOMICS 

other wage-earning or productive work on the farm. Vocational agri- 
cultural education is, thus, one phase of effort toward conserving the 
valuable years of youth for the best uses of both society and the 
individual. 

There is now a general movement throughout our country for 
agricultural education of secondary grade. There are probably not 
fewer than 500 secondary schools in which agriculture is now seriously 
taught. The training varies from the study of an agricultural text- 
book in the hands of the general teacher, who does not bring to her 
task any special training, to the out-and-out vocational school, where 
the teachers are specialists in agriculture. 

Productive work of a high order of efficiency is coming to be con- 
sidered the real test of all systems of vocational education of secondary 
grade. Particularly in vocational agricultural education it is coming 
to be accepted that the training must be such as to develop both skill 
and managerial ability. The competent farmer must be not only 
expert in the varied technique of his calling but also a sound and 
progressive business manager. 

Neither skill nor business ability can be learned from books alone, 
nor merely from observation of the work and management of others. 
Both require active participation during the learning period in pro- 
ductive farming operations of real economic or commercial importance. 
In general, if there is a defect in the large agricultural schools which 
boys must leave home in large numbers to attend, and which, in order 
to secure adequate attendance to justify their cost, must apparently 
limit their training to six or eight fall and winter months, it is the 
defect of putting too great reliance on books and observation, to the 
exclusion during the intensive learning periods of active participation 
in the type or types of productive farming the boys intend to follow 
after graduation. Too great, one may almost say in the cases of many 
of the boys fatal, reliance is put on the ability of the students once well 
grounded in sound theory at the school to put that theory into suc- 
cessful practice on their own farms alone and unaided. 

The problem, then, of providing for actual participation both as 
manager and as worker in productive farming, simultaneously with his 
classroom instruction, on the part of the boy in the agricultural school 
may fairly be looked upon as the most startling and stupendous prob- 
lem in the great field of vocational education. How shall it be solved ? 

Massachusetts has developed a plan for the solution of this prob- 
lem. A vocational agricultural school may be established by any 



HUMAN EFFORT AS A FACTOR IN PRODUCTION 251 

town or city, or by any group of towns or cities which may voluntarily 
form themselves into a district for this purpose. Evening-school 
classes in agriculture may be established by any school committee. 
State aid is given such schools to the extent of paying one-third the 
expense of maintenance. 

Vocational agricultural departments may be established in 
selected high schools. The agriculture must be taught by a specially 
qualified teacher who gives his attention exclusively to agriculture. 
His vacation must be taken during the winter months, usually 
December, January, and February. He must continue his work 
throughout the summer. Little stress is laid on land or operations 
at the schoolhouse. Every possible stress is laid on the utilization of 
the land and equipment at the homes of the pupils; and it is the 
instructor's duty during the summer to supervise work prepared for 
in the agricultural classes, from seedtime to the securing of the harvest. 
In the cases of such departments, the state reimburses the communities 
maintaining them to the extent of two-thirds of the salary of the 
agricultural instructor. 

A fundamental feature of the Massuchusetts plan is embodied in 
what has been termed " part-time work in agriculture." Part-time 
work in industrial education means that the student spends part of 
the time required for his training in the shop or manufacturing estab- 
lishment and part of the time at the school building, both school and 
shop work, however, being intimately related and supplementary to 
each other. Part-time work as applied to agricultural education 
means that the student must spend part of the time required for his 
education in productive farm work, preferably at home, and part of 
his time at the school, the farm work and school study being closely 
correlated by the school at points selected from season to season or 
from year to year, and the farm work being given the highest possible 
educational value by competent school supervision. 

The part-time-work plan reduces the cost of agricultural training 
of secondary grade so as to place effective training for the farm within 
reach of many communities which would otherwise be unable to 
secure it. Fifty departments in fifty groups of farms should cost no 
more than five large schools such as those found in other states. It 
obviates the necessity of sending the boy away from home in order to 
secure the benefits of agricultural training. The cost of living for the 
boy is less at home than it would be at a boarding-school. Parents 
who need the help of their boys are deprived of their services during 



252 AGRICULTURAL ECONOMICS 

only a portion of the day. The plan also is proving to be wonderfully 
effective. Co-operative work between the* school and the farm home 
is the most effective known means of trying out under the conditions 
of individual farms, over widely scattered areas, methods which have 
proved to be profitable elsewhere, as, for example, at the state agri- 
cultural college or experiment station. Such co-operation furnishes 
effective experimental means by which each boy can try out the 
merits of the farm home as an agency for producing profits when 
treated by the best known methods. The principles and methods 
taught by the school can be positively adapted by each boy to the 
economic conditions of the farm on which he may spend his working 
days. 

An essential feature of the home-project or part-time plan of 
training is the consideration of cost at all points. The boy by this 
method learns first of all through his experience that there can be no 
product without cost and no profit without excess of receipts over all 
expenditures. After such an experience he will not be likely to under- 
take a new enterprise without a serious attempt to estimate accurately 
his probable profit. The boy is subjected to the prevailing economic 
conditions under which the home farm must yield a profit or loss at 
the end of each year of work. The methods by which the boy becomes 
on a small scale a farmer or business man for himself gives the project 
which he is carrying on and the school work in which he participates a 
reality not otherwise attainable. 

72. FARMERS' CO-OPERATIVE DEMONSTRATION WORK 1 
By S. A, KNAPP 

The aim of the farmers' co-operative demonstration work is to 
place a practical object-lesson before the farm masses, illustrating the 
best and most profitable methods of producing the standard farm crops 
and to secure such active participation in the demonstrations as to 
prove that the average farmer can produce better results. The para- 
mount issue is how most wisely and effectively to aid all the rural 
people. If each farmer is shown how to produce twice as much to the 
acre as he now produces and at less cost, it will be a profit in which 
all rural classes will share and will be the basis of the greatest reform 
ever known to rural life. 

1 Adapted from Circular No. 21, Bureau of Plant Industry, United States 
Department of Agriculture, pp. 3-13. 



HUMAN EFFORT AS A FACTOR IN PRODUCTION 253 

How can the knowledge of better agricultural methods be conveyed 
to the masses in a way so effective that the methods will be accepted 
and their practice become common? For many years the United 
States Department of Agriculture, the agricultural colleges, the 
experiment stations, the agricultural press, the farmers' institutes, 
and the national and state bulletins upon agriculture have thrown 
light upon almost every topic relating to the farm. These have been 
of great assistance to farmers who are alert and progressive, but the 
masses, especially in the South, have scarcely been affected. There 
came a time under cotton-boll-weevil conditions when it was found 
necessary to reach and influence the poorer classes. The co-operative 
demonstration plan was then tested. 

In country villages the banker, the merchant, and the editor join 
with the leading farmers of the section in indorsing the progressive 
plans of the demonstration work; farmers agree to follow instructions, 
and demonstration plots of one or more acres are located so as to place 
a sample of the best farming in each neighborhood of a county or dis- 
trict. There must be enough of these to allow every farmer to see one 
or more during the crop-growing period. The necessary work on the 
plot must be done by the farmer and not by a government agent, 
because the whole object-lesson is thereby brought closer to the 
people. The demonstrating farmer understands it better because 
he does the work and his neighbors believe that what he has done 
they can do. 

Each month during the season instructions are sent to every 
demonstrator and co-operator, clearly outlining the plan for managing 
the crop. In addition, a local agent is expected to call on each demon- 
strating farmer monthly and explain anything not understood in the 
instructions. 

Previous notice by letter is given to all the co-operating farmers in 
a neighborhood to meet the agent on a certain date at a given demon- 
stration farm, where the crop and plans are thoroughly discussed. 
This is called a "field school" and has been marvelously effective in 
arousing local interest. At such meetings and on all occasions where 
the agents meet farmers, the fundamental requirements for good 
farming are discussed by the aid of notes sent out from the central 
office. In the course of these discussions it has often developed that 
the majority of small farmers had never fully complied with any of 
these rules. They thought they knew all about farming and charged 
their small product and failures to the seasons or the land. 



254 AGRICULTURAL ECONOMICS 

One farmer at a public meeting in Alabama this year expressed 
his views as follows: "I was born in a cotton field and have worked 
cotton on my farm for more than forty years. I had usually raised 
one-half a bale on my thin soil and I thought that was all the cotton 
there was in it in one season. The demonstration agent came along 
and wanted me to try his plan on two acres. Not to be contrary, I 
agreed, but I did not believe what he told me. However, I tried my 
best to do as he said, and at the end of the year I had a bale and a 
half to the acre on the two acres worked his way and a little over a 
third of a bale on the land worked my way. This year I have a bale 
and a half to the acre on my whole farm. As a good cotton planter 
I am just one year old." 

It is of the greatest importance to confine the work to a few 
standard crops and the instruction to the basic methods and principles 
which stand for the best results and to repeat this line of instruction 
on every occasion until every farmer works according to some system 
and knows the methods that make for success instead of charging 
failure to the moon, to the season, to the soil, or to bad luck. It 
requires several years so to impress these teachings upon the masses, 
even when supported by demonstration, that they become the general 
custom of the country. The first year a few try the plan on small 
areas; the second year these greatly enlarge the area and some of 
their neighbors follow their example; the third year possibly 40 or 50 
per cent adopt some of the methods ; and so work progresses by the 
force of demonstration and public opinion until its general adoption 
is secured. 

Every step is a revelation and a surprise to the farmer. He sees 
his name in the county paper as one of the farmers selected by the 
United States Department of Agriculture to conduct demonstration 
work; he receives instructions from Washington; he begins to be 
noticed by his fellow-farmers; his better preparation of the soil pleases 
him ; he is proud of planting the best seed and having the best culti- 
vation. As the crop begins to show vigor and excellence, his neighbors 
call attention to it, and finally when the demonstration agent calls 
a field meeting at his farm the farmer begins to be impressed, not only 
with the fact that he has a good crop, but that he is a man of more 
consequence than he thought. This man that was never noticed 
before has had a meeting called at his farm; he concludes that he is a 
leader in reforms. Immediately the brush begins to disappear from 
the fence corners and the weeds from the fields; the yard fence is 



HUMAN EFFORT AS A FACTOR IN PRODUCTION 255 

straightened; whitewash or paint goes on the buildings; the team 
looks a little better and the dilapidated harness is renovated. Finally, 
the crop is made and a report about it appears in the county paper. 
It produces a sensation. A meeting is called by the neighbors and 
the farmer is made chairman; he receives numerous inquiries about 
his crop and is invited to attend a meeting at the county seat to tell 
how he did it. 

He made a great crop, but the man grew faster than the crop. 
There can be no reform until the man begins to grow, and the only 
possible way for him to grow is by achievement — doing something of 
which he is proud. He is a common farmer. What line of achieve- 
ment is open to him but doing better work and securing greater 
results on his own farm ? As soon as the man begins to grow he will 
work for every rural betterment. 

73. THE NEGRO AS A FARMER 1 
By C. E. ALLEN 

It is the purpose of this paper to present the agricultural situation 
of the Black Belt of Alabama, by comparing it with the regions imme- 
diately adjacent to it, north and south, where white majorities of 
population are found and successful farming obtains. 

In the countries of the Black Belt in 1910 there were 26,138 white 
farmers and 76,648 negro farmers cultivating 1,798,056 acres in 
cotton and 812,982 acres in corn. The average production of cotton 
per acre was o. 27 of a bale, and of corn 10.4 bushels per acre. The 
cotton acreage in 1910 was 51,840 acres greater and the corn acreage 
140,614 acres less than in 1900. In the twenty-one White Counties 
there were 51,131 white farmers and 20,797 negro farmers cultivating 
917,143 acres in cotton and 771,378 acres in corn. The average pro- 
duction of cotton per acre was o . 34 of a bale and of corn 1 1 . 4 bushels 
per acre. The cotton acreage was 203,880 acres greater and the corn 
acreage 102,594 less than in 1900. 

Two significant facts stand out in these records: the per acre 
yield and the increase or decrease of acreage. As to the per acre 
yield, it is conceded by all who are familiar with the soils of the Black 
Belt and the White Counties that by nature the soils of the Black Belt 

Adapted from "Greater Agricultural Efficiency for the Black Belt of Ala- 
bama," The Annals, LXI (September, 1915, on "America's Interests after the 
European War"), 187-98. 



256 AGRICULTURAL ECONOMICS 

are much more fertile and more adapted to the cultivation of the 
staples than the soils of the other regions, yet there is a smaller average 
yield per acre in the Black Belt. The reduced acreage of the Black 
Belt is due to the decline of rural population, as will be shown herein 
later, and not to turning the lands into other forms of agriculture. 
They are idle and vacant, turned in many instances into grass fields. 
In the White Counties, the increase is due to increase of rural popula- 
tion and to opening up new lands. 

An analysis of the two groups of counties locates more definitely 
the causes of the smaller average yield per acre of the Black Belt. 
In the counties of the Black Belt in which the negro constitutes 62J 
per cent of the population, the average yield of cotton per acre is o . 26 
of a bale and 10 . 5 bushels of corn per acre; in those counties in which 
the negro constitutes from 50 to 62! per cent of the population, the 
average yield of cotton per acre is 0.30 of a bale and 10 bushels of 
corn per acre. In the group of White Counties where the negro con- 
stitutes 37§ to 50 per cent of the population, the yield per acre of 
cotton is 0.34 of a bale and 11. 4 bushels of corn; in the counties 
where the negro constitutes 10 to 37I per cent of the population, the 
yield of cotton per acre is o . 35 of a bale and n . 5 bushels of corn per 
acre. These results are significant, for the negro in increasing 
majorities is found on the best soils of the state. 

Scientific farming includes within its program not only actual 
agricultural results, but the whole life of the farm: improvement of 
soils, adequate farm buildings, new and modern implements and 
machinery. In the Black, Belt the value of lands and buildings 
increased 88 per cent between 1900 and 19 10 and the value of imple- 
ments and machinery increased 69 per cent. In the White Counties 
the percentage of difference in the same items for the same period of 
time was: land and buildings, 150, buildings alone, 133, implements 
and machinery, 113 — a percentage of difference in each item twice 
as great as in the Black Belt. 

An analysis of the two groups of counties as to the above items 
also reveals striking results. In the counties of the Black Belt where 
the negro constitutes 62 \ per cent of the population the improvements 
between 1900 and 1910 were: land and buildings, 75, buildings alone, 
68, implements and machinery, 54; in the counties where the negro 
constitutes 50 to 62I per cent of the population: land and buildings, 
108, buildings alone, 107, implements and machinery, 93. In the 
White Counties where the negro constitutes 37 \ to 50 per cent of the 



HUMAN EFFORT AS A FACTOR IN PRODUCTION 257 

population, the improvements were: land and buildings, 121, buildings 
alone, 102, implements and machinery, 96; in the counties where the 
negro constitutes 10 to 37 \ per cent of the population: land and build- 
ings, 171, buildings alone, 153, implements and machinery, 130. It 
is thus evident that agricultural production and farm improvements 
increase in a ratio inverse to that of the presence of negro population. 

The real condition and spirit of agriculture are probably more 
accurately revealed in the movements of population. Between 1900 
and 1 9 10 the rural population of the Black Belt, if we exclude four 
border counties, decreased 37.1 per cent. Ten counties suffered an 
average loss of 8.3 per cent. In rural and urban population nine 
counties suffered a loss of white individuals; eleven counties suffered 
a loss of negroes. On the other hand, every county in the group of 
White Counties increased in rural population. The average increase 
for the group was 21.3 per cent in rural population. The entire white 
population, rural and urban, increased 19 per cent and the negro 
population 20 . 8 per cent. 

Such is the agricultural situation in the Black Belt as revealed by 
the records — a low rate of production, low rate of farm improvements, 
and an actual decline in rural population. 

74. RURAL ILL-HEALTH AS A CAUSE OF INEFFICIENCY 1 
By ALLEN J. SMITH 

In 1 90 1 and 1902 and 1903 the hook-worm formed the nucleus 
of a jest in talk and printed items; it was then the "lazy worm." 
The poor Southerner who harbored the worm was if anything incensed 
by the disgrace he felt was incurred by his becoming ignorantly its 
host. But as time and experience confirmed and added to the earlier 
warnings, the real meaning of the insidious enemy to the district 
fastened itself in the public mind; and more than one paper earnestly 
urged the economic as well as the purely pathological importance of 
the disease. 

Is there wonder that our southern states lagged in the march of 
American progress? There have been numerous causes which held 
back the fuller development only now beginning to open before us 
of this which is naturally the most desirable part of our whole count ry, 

1 Adapted from "The Economic and Biologic Aspects of Hook-Worm Disease 
in the Southern United States," Univeristy of Pennsylvania Bulletin, Fifteenth 
Series, No. 3, Part 5, pp. 286-90. 



258 AGRICULTURAL ECONOMICS 

much of it valuable for its mineral resources, much of it fertile beyond 
imagination, all of it abounding in the natural advantages of forests 
and streams. The feudal agricultural system originally undertaken 
was outgrown even before the American Revolution; and abetted and 
was itself sustained by negro slavery, which worked its curse upon the 
land in so many ways. The Civil War, with the political reconstruc- 
tion period, the fear of yellow fever and its occasional ravages, the 
constant menace of malaria, which killed or weakened all but the 
favored few who could command cinchona in the rich marshy districts; 
all these were factors. But among them uncinariasis (the hook-worm 
disease) stands with malaria as worse than war and the devastation 
of battles and worse than all the other pathogenic agencies in com- 
bination. Through the influence of one or both of these diseases the 
men and women of the South, bred from the best American Colonial 
stock, offspring of pioneers, with the blood of English gentry and 
Continental cavaliers in their veins, sank lower and lower in physical 
degradation and squalor; were derided and denounced as lazy and 
shiftless, and condemned in popular opinion as a disgrace and worth- 
less. But in reality their languor was not the product of the balmy 
breezes or the luxurious bounty of nature, as often charged. These 
people were sick; some died. They did not themselves know their 
true state, and in the lethargy of the disease they were not interested 
enough to deny the wholesale charges against them. When spared 
by death and come to parenthood the sallow, hollow-faced weaklings 
created offspring who died or grew up in turn to inefficiency. 



D. Incentive and Discouragement 
75. GOOD AND BAD MANAGEMENT OF FARM LABORERS 1 

Universally we are running our farms with insufficient labor. As 
a consequence the work piles up and we push and sweat and fume. 
We work one man to death, hang his hide on the fence, and hire 
another. By working the land with insufficient labor we are thwarting 
all of our highest ambitions as farmers. We deplete the soil, retard 
development, impoverish the home life, break our own lives, and dis- 
courage the young and drive them from the soil, thus increasing the 

1 Adapted from "Rural Social Problems," Fourth Annual Report of the Wis- 
consin Country Life Conference, abstract of remarks of W. J. Dougan and W. M. 
Leiserson, pp. 3-5. 



HUMAN EFFORT AS A FACTOR IN PRODUCTION 259 

ranks of the consumers and decreasing and weakening the ranks of 
producers. 

In January more farm hands are looking for work than can get 
jobs. In March the tide turns and there are not enough men to go 
around. What shall men do between times ? Spend their little sav- 
ings and trust to luck? Thus the character of the men who stay 
deteriorates, while good men refuse to remain in an occupation which 
offers no better future. As soon as work on the farms is organized, 
and employment is made steady for all the help, just so soon will a 
better class of laborers be attracted to the farm. 

As the farm-owner wishes life to be free from eternal drudgery for 
himself and family, yielding the fruits of happiness, leisure, and cul- 
ture, he would do well to consent and arrange to give the farm hand 
who shares the shelter of his roof a fair chance at these same benefits. 

The mass of farm hands are realizing that they are to remain wage- 
earners and that they will not become independent farm-owners. 
This means that the farm hand is no longer willing to endure long 
hours with no recreation. Formerly he considered being a hired hand 
a temporary condition. He could stand anything then, for he looked 
forward to the independent life of a farm-owner. But with this hope 
gone, and with nothing to look forward to but a life as a hired hand, 
he wants that life improved. He wants regular hours, a chance for 
recreation, a good place to live in, and enough wages to maintain a 
family according to American standards. A three years' trial of a 
regular half-day off for each farm hand has been successful on 
Mr. Dougan's dairy farm. There are six hired men. One has Monday 
afternoon off, another Tuesday, etc. Whatever the emergencies, it 
is understood nothing shall interfere with this arrangement- On 
Sunday each man gets another half-day. 

The tendency is to pay all men the "going wage." This keeps 
down ambition and encourages incompetency. There are men whose 
services are worth two or three times that wage, and others who are 
expensive help at half the amount. One may discriminate in this 
matter on the same farm and keep contented help, on two principles : 
The first is to pay as generously to labor as the income can possibly 
stand, and to increase this pay as business increases; the second is 
to distribute this pay according to experience, ability, and length of 
continuous service on the farm. 

Some form of dividing profits with hired help is perfectly feasible. 
A system of arriving at an actual basis for such profit-sharing implies 



260 AGRICULTURAL ECONOMICS 

a record of production and a record of sale. The system must be 
within the comprehension of the hired man if it is to enlist his interest 
at every step in the business process. Such a system might likewise 
be applied to the hired girl in the house. The English and Scotch 
plan of giving premiums and medals at agricultural fairs, to those 
who tend and fit the prize cattle, should be introduced into our county 
and state fairs. 

76. TENANCY AS A CAUSE OF INEFFICIENT LABOR 1 
By C. E. ALLEN 

In ante-bellum days the industrial system of the Black Belt was 
made up of the big plantations as the industrial units, and the domi- 
nant feature of these units was organization and management, which 
made this the region of supremacy in Alabama. In the adjustment 
of labor to the new conditions of freedom, however, this industrial 
organization was shattered. The negro was employed largely under 
two forms of tenancy: the renting system and the share system. 
Since the beginning of the system the renting negro has been without 
supervision and control. By the lien law he was able to obtain 
supplies from merchants of near-by towns, and being obligated for only 
so much rent, he farmed according to his own pleasure, with the result 
that the farm on which he worked consistently deteriorated. The 
ditches grew up with grass, the soil washed away, fences and houses 
decayed, roads went unkept, and there arose in the land the saying, 
"The negro renter's foot is poison to the soil." On the other hand, 
the share system has involved a degree of control by white men, close 
in some instances, indifferent in others. The white planters who 
remained on the plantation after the war employed largely the share 
system, sometimes a combination of share and renting. Under this 
system close supervision was necessary, else failure and ruin were 
certain. 

77. THE STIMULUS OF FARM OWNERSHIP 

It has long been a settled tenet of our agricultural philosophy that 
farm ownership has a beneficial effect upon the character of work 
done by the farmer. Our public-land policy has had this as one of its 
principal arguments, and much of the rural-credits discussion has run 

1 Adapted from " Greater Agricultural Efficiency for the Black Belt of Ala- 
bama," The Annals, LXI (September, 1915, on "America's Interests after the 
European War"), 193-94. 



HUMAN EFFORT AS A FACTOR IN PRODUCTION 261 

upon the same lines. It has been repeatedly pointed out that the 
man who owns the land upon which he works will work harder and 
more wisely; he will take pride in his work; and will be conscious of 
a lasting benefit to be received from every improvement in the char- 
acter of his farming; conscious, too, that slovenly work or harmful 
methods will have a permanent effect in lessening the productivity 
of his labor in the future. 

Undoubtedly this is in large measure true. 1 Still we have 
awakened of late to the fact that absolute ownership of the ground he 
tilled has also left the ignorant or careless farmer free to abuse it as 
he would. It is well to face the fact that much laziness and ineffi- 
ciency has been tolerated among those who work our farms, simply 
because ownership of the land has meant that they could be neither 
controlled nor dispossessed. With the coming of a better knowledge 
of the science of agriculture we may expect to find the beneficial effect 
of ownership reappearing and its most conspicuous abuses tending to 
be eliminated. 



78. INCREASING EFFICIENCY THROUGH JOINT ACTION 2 

If a merchant go into a new town to open a business, he need not 
feel entirely strange, for he is soon invited to join a chamber of com- 
merce or a merchants' association, which, though recognizing the 
proper place of competition, attacks with vigor the problems which 
all merchants have in common. If a skilled mechanic move to a new 
city, he finds common ground in the labor union, and he does not feel 
alone. But for the farmer there is no organization that compares 
with the merchants' association or the trade union for strength of 
influence and efficiency. 

To overcome this deficiency and to provide a competent organiza- 
tion, there is pending in the national Congress a joint resolution calling 

1 A recent survey of 272 owner farms and 179 tenant farms in Missouri (see 
Bulletin 121, Missouri Experiment Station) found that " one-tenth of the owner 
farms have acreage crop yields of less than 75 per cent of the average for the 
region, while one-fourth of the tenants are in this group." One-half of the tenants 
had "crop yields which are less than 90 per cent of the average yield for the region 
while only 30 per cent of owners fall below this line. The results as a whole show 
that the owner farmers rank higher in crop yields than do either part owner or 
tenant farmers." 

2 From Report on Unemployment of the Commission of Immigration and 
Housing of California, December, 1914, p. 23. 



262 AGRICULTURAL ECONOMICS 

for the creation of a national marketing commission to be composed 
of twenty-nine members, fifteen of whom shall be farmers and fourteen 
of whom shall be selected with reference to their eminence in commerce, 
law, finance, and transportation, said commission to adopt a plan of 
action for the effective organization of the states, counties, and 
localities of the United States for the economic distribution of the 
products of the farm. The type of this proposed commission is the 
Landwirtschaf tsrat of Germany. It is conceivable that such a semi- 
official body, taking the place in reality of all the so-called national 
farmers' organizations, would wield great power. Within its hands, 
and in the hands of the subordinate state, county, and local branches, 
could well be placed the solution of all. those problems that today 
vex the unorganized farmer. From such an articulate body we 
should have the right to expect some aid in the solution of our prob- 
lem of unemployment, through its co-operation with the proposed 
bureau of labor exchanges. 

Therefore we trust that your Excellency will see fit to support the 
above-mentioned congressional resolution in such ways as you may 
deem wise, and that you will urge upon our state legislature to memo- 
rialize Congress to the same effect. 

79. AN ASSOCIATION FOR BETTER FARMING 1 
By GEORGE W. BUSH 

The county farm bureau has come to be known as a group of 
farmers in the county, organized for self-help, and is recognized as a 
local organization of farmers, formed for the purpose of providing 
necessary machinery for the co-operative effort of attacking the prob- 
lems confronting the farmer and the farmer's wife. It is also the 
local headquarters, or clearing-house, for agricultural information and 
for the extension work of the College of Agriculture and the United 
States Department of Agriculture. 

The aims of the farm bureau are many, the chief of which are as 
follows : 

1. To assist in the federation of community interests. In all 
counties there are many local organizations, such as county fair asso- 
ciations, live stock breeding associations, granges, and various other 
associations, all striving in a more or less independent manner to 
better their conditions. How much more could be accomplished if 

1 Bulletin of the Ohio State University, Vol. XX, No. 6, pp. 54-56. 



HUMAN EFFORT AS A FACTOR IN PRODUCTION 263 

these independent interests were federated and striving together for 
certain definite desired objects. The purpose of the farm bureau is 
to co-ordinate these and get all working together as far as possible. 

2. To help organize community interests already present. In 
every county there are undeveloped enterprises awaiting organization. 
For example, there is the general production of good seed — corn, 
wheat, oats, etc. — in sufficient quantities to develop a reputation for 
it, the breeding of horses for local use, and, in many cases, the improve- 
ment of dairy herds by the formation of cow-testing associations, com- 
munity drainage associations, etc. There are many other projects, 
too, that need development. It is the purpose of the farm bureau to 
organize and assist these. 

3. To give encouragement and aid in the development and forma- 
tion of farmers' co-operative companies. 

4. To study local conditions with an eye to helping adjust labor 
difficulties. In every community there are economic problems having 
to do with the cost of production, cost of transportation, productive 
investments of capital, labor scarcity, and the like, that often have a 
vital influence upon the agriculture of the county. Many of the 
bureaus assist in bringing the unemployed in touch with the employer 
on the farm, who, many times, is hard pressed for sufficient labor to 
carry on farm operations. 

5. To demonstrate, where possible, better farm management. 
There is opportunity everywhere for better farm practices and more 
profitable systems of management. Oftentimes the adoption of farm 
practices that a change of conditions has brought about, practices that 
were unknown thirty years ago, will add materially to farm incomes. 
It is one of the functions of the bureau to point out, if possible by 
practical demonstrations and co-operation on different farms and with 
various farmers in scattered neighborhoods in the county, such of 
these newer methods as have proved their worth. For example, we 
may mention the more liberal use of lime in many cases, the better 
management of fruit trees, the improvement of the flocks and herds 
through live stock associations, etc. 

6. To give personal assistance. This is, by all means, the most 
important. The farm bureau manager is called upon each day by 
letter, telephone, or personal visit to give advice on varied subjects 
and practices. In order to cover this, no man should be a farm bureau 
manager who has not had the experience acquired by several years of 
successful farm management, coupled with technical knowledge on 



264 AGRICULTURAL ECONOMICS 

many different agricultural matters. Questions concerning drainage, 
tillage, seed treatment, spray mixtures, orchard renovation, fertilizer 
formulas, feed rations for farm animals, and many others relating to 
the newer farming methods are constantly being asked. These must 
be met by specific answers from the farm bureau manager, or from 
specialists on the different problems. While his usefulness rests more 
with his ability as an organizer of county affairs and as a demonstrator 
of successful practices, this last should not be forgotten. 



CAPITAL-GOODS AS A FACTOR IN AGRICUL- 
TURAL PRODUCTION 

Introduction 

The economist who essays to give an account of the origin of 
capital may well use agriculture as his text. Our industrial evolution 
started with agriculture, and our account of the development of 
industrial equipment may well go back to the point where husbandry 
begins. Among the first primitive implements that men chose or 
fashioned from natural objects were the digging- stick, the harvester's 
basket, flint or bone hoes, fences to protect some spontaneous crop 
from animal depredations, or scarecrows and nets to safeguard them 
from thieving birds. To produce these goods the savage had to 
increase his labor beyond the limit demanded by mere subsistence. 
Instead of stopping work the moment his belly was filled, he must 
needs labor on, to fashion new equipment for tomorrow's labor. Or, 
when he had laid by enough of food to keep him from hunger during 
the unproductive season, he might not lapse into idleness. Dawning 
foresight urged him to gather and store yet more of seeds and grains 
and tubers that something might remain to be planted at the advent 
of the next growing season. 

But capital is not born of this single parent. If Industry be the 
fecund father, Abstinence is not less the fostering mother. It has 
been suggested that the first animals to be domesticated were simply 
the few saved from an extraordinary catch, instead of being wasted 
in an orgy of feasting. Certain it is that when surplus crops had been 
garnered or when a few animals had been caught and tamed, self- 
control must be exercised if the fruits of this unwonted toil were to 
lay the foundations of an enlarged scheme of production in the future. 

Granting the importance of the early pastoral and agricultural 
experiments of the human family in the beginnings of capital forma- 
tion, it is often asserted that the vast accumulations of capital-goods 
which have characterized the modern epoch (since the coming of power 
machinery) have occurred outside of agriculture. As a matter of fact, 
a considerable part of the whole process of creating agricultural 

265 



266 AGRICULTURAL ECONOMICS 

products has been removed from the country and industrialized in 
town. In strict logic the fertilizer plant, the implement factory, and 
the stock-feed mill are functioning as capital-goods for the farmer, 
though their ownership is vested in other hands. Likewise, the 
grain fleet and the granger railway equip agriculture with capital- 
goods no different in point of service from the farmer's team and 
wagon which haul his wheat to the elevator. Naturally, since these 
specialized industries auxiliary to agriculture have left the farm and 
grown up in the city, we do not try to merge their capital-account 
with that of agriculture. But it is well to note that the farmer is the 
beneficiary of whatever added power has come to these collaborating 
industries through their accumulations of capital-goods. 

Looking, then, at the role of capital-goods employed directly in 
the processes of agriculture, it is evident that there are some pecul- 
iarities which distinguish this industry from others. Agriculture is, 
in the nature of the case, an out-df -doors process. As a result, build- 
ings are bound to remain a less important item in the productive 
equipment of the farm enterprise than is the case in factory employ- 
ments. This does not mean, however, that the farmer can afford to 
neglect this factor of his productive plant. No matter how skilful a 
breeder or feeder one is, his labor will produce but a sorry product if 
he is not equipped with proper housing for his stock. The labor that 
raises big yields of grain or cotton or fruit will net but a fraction of its 
possible productivity if, for lack of storage facilities, the grain gets 
moldy, the cotton stained, and the apples frosted, or if crops must be 
dumped on the market regardless of consumers' demands. There are 
many regions in which building investments might be expanded, to the 
great increase in efficiency of farm operation. Today machinery rusts 
out for lack of shelter, and the efficiency of the laborer himself is 
sometimes lowered by the lack of proper housing (see selection 30). 
A recent study of tenancy in the South indicates that an important 
factor in the low efficiency of tenant farmers in Texas is to be found 
in the inadequate buildings for sheltering machinery and stock and 
for housing the tenant family. 1 

As for devices for catching and harnessing the powers of nature, 
mechanical pursuits seemed long to have the best of agriculture, since 
water and steam power were well adapted to their uses and little 
suited to the needs of the small and scattered operations incident to 
agriculture. Horse-power has worked wonders for agriculture since 

1 Bulletin of the University of Texas, 1915, No. 39. 



CAPITAL-GOODS AS A FACTOR IN PRODUCTION 267 

the middle of the nineteenth century; the portable gas engine goes 
still farther in his aid; and water-power promises much for the future 
by supplying cheap electric current. Besides the utilization of small 
water-power sites upon the farm, we may look to see the pouring of 
considerable funds into the development of large hydro-electric plants. 
These will be interested in the sale of current to the farmer not less 
than to the trolley line which passes his farm. Similar developments 
by outside capital have already taken place in the building of great 
irrigation and drainage works. Such enterprises fall distinctly in 
Bohm-Bawerk's third class of capital services: instead of doing better 
or more cheaply a task already done in some other way, they make 
possible the achieving of a result which could not be secured at all 
without the intervention of such powerful capital-goods. 

Most significant and promising, however, of all the efforts which 
agriculture is making today to equip itself with more productive 
capital-goods, are those which aim to furnish better instruments for 
utilizing the great biological forces upon which the farmer most inti- 
mately depends. Science is rapidly finding out how to concentrate 
the productive power of ten inferior cattle or swine or poultry into one 
super-animal. The extraordinary sire is capitalized at thousands of 
dollars simply because of his prepotency to add that superior produc- 
tivity to a numerous progeny. Much money goes into plant-breeding 
work simply because the seeds or buds or scions so secured have a 
magnified power to use sunshine, plant food, and human care for the 
producing of consumers' goods in the future. 

This last class of goods serves very well to illustrate the evanescent 
character of capital. It must be embodied in appropriate capital- 
goods in order to be productive at all, but so embodied it is subject 
to countless dangers of waste and ultimate dissipation. The highly 
bred animal is more of a liability than an asset to the unskilful farmer. 
It requires careful feeding and special care, or a high-priced death 
results instead of enlarged production. Likewise, breeding must be 
maintained or improved, else the strain "runs out." Every farmer 
knows that the value of a team may be quickly impaired by improper 
handling, and has seen expensive machinery spoiled by careless use. 

But no less real is the waste of capital due to ill-advised purchases. 
Selection 91 shows how state authority is doing much to eliminate 
actual fraud or misrepresentation. But a given article, without hav- 
ing any fault of structure or composition, may be technically unsuited 
to the purpose in mind or its purchase not economically justifiable 



268 AGRICULTURAL ECONOMICS 

in the given time and circumstance. The "lightning rod agent" may 
be taken as the archetype of a numerous brotherhood whose aid in 
directing the farmer's capital outlays has kept those expenditures from 
effecting the greatest increase in the productivity of his farm. "Agents 
sell to all who will buy and the result is that thousands of dollars are 
invested in worthless goods that soon find a resting place in the scrap- 
heap, and the poor farmer and his family struggle harder than before, 
for often the money to buy this needed help has been borrowed, which 
makes another weight to an already heavy burden." Undoubtedly 
rural communities have often been exploited in such ways. A 
mechanical engineer of my acquaintance asserts that most of the farm 
machinery offered in the market is, in point of design and materials, 
far below the standard common in machinery offered to industrial 
users. So many of these latter make their purchases only upon the 
advice of a competent engineer that manufacturers find it necessary 
to keep their goods always up to a standard which will pass expert 
examination. Farmers have seldom been competent to judge accu- 
rately the machines which they were buying, and the individual 
farmer buys in too small quantities to make it feasible for him to hire 
an expert adviser or secure laboratory tests of materials. Several of 
our agricultural colleges have set up testing plants and offer courses 
in "agricultural engineering" or similar subjects. 1 

But to no small extent this becomes a question of the organization 
of our agricultural industry. Not only is the individual farm too small 
for efficient buying of machinery and materials, but its size as an 
operating unit is generally not such as to secure the greatest technical 
efficiency of machine equipment. The steam or gasoline thrashing 
outfit, milking machines, water and light systems, silo-fillers, and hay 
presses are fair examples in point, and even the corn binder, spraying 
outfit, manure spreader, and almost countless others might be cited 
in particular cases. Either the farm must have a ruinously large 
stock of tools and machinery, be subject to the vicissitudes of 
custom work, or employ cruder methods in the face of competition 
by more efficient appliances. Specialization, co-operation, and con- 

1 "Professor J. Lee Hewitt was called to Bentonville last week to test a new 
device for mixing lime sulphur, which is used in spraying fruit trees. In speaking 
of the incident Professor Hewitt said in substance: 'A few years ago the people 
of the county would have tried out the machine with good or bad results without 
a thought of calling upon the Experiment Station for advice or an estimation of 
the mixer's value.'" — University of Arkansas Weekly, January 13, 1916. 



CAPITAL-GOODS AS A FACTOR IN PRODUCTION 269 

solidation are three types of solution which have presented themselves. 
But we still wrestle with the problem. 

This brings us back to our earlier proposition, viz., that the prime 
source of capital must be found in the surplus productivity of the 
enterprise. That farmer will succeed and that type of agriculture 
prosper which effect the greatest economy in the use of capital, 
which means the most judicious investment of funds and the most 
careful conservation of capital-goods. This problem of organization 
will reappear in chapters vi and vii. 

A. The Significance of Capitalistic Methods 1 

80. THE ECONOMIC CONCEPT OF CAPITAL 
By CHARLES GIDE 

Numerous authors have invented stories of the Robinson Crusoe 
type, with a view to showing us how man originally grappled unaided 
with the difficulties of existence. But not one of these authors has 
failed to provide his hero with a few tools or provisions, usually saved 
from a shipwreck. These writers knew perfectly well that unless 
they did this the story would have to stop at the second page, for the 
life of their hero could not have lasted longer. The same state of 
things prevails in actual everyday society, convincing us of the 
utility of capital. There is no problem more difficult to solve than 
how to acquire something when one possesses nothing. Take a com- 
mon laborer, a man without means. How can he earn his bread? 
He cannot engage in any productive enterprise, not even that of a 
poacher, for a poacher needs a gun. He cannot even become a burglar 
without implements. He would be as wretched, as helpless, and as 
sure to die of starvation as a Crusoe who had saved nothing from the 
wreck, were it not for the wage-system that enables him to enter the 
service of someone provided with capital who is willing under certain 
conditions to furnish him with the food and the tools that are requisite 
for production. 

The first pointed stone that was picked up served to help make 
other new implements under conditions more favorable to production; 
and these in turn helped to prepare the way for still more discoveries. 
The ease of production increases like a geometrical progression and is 
proportionate to the amount of wealth already produced. 

1 Adapted from Principles of Political Economy, pp. 116-29. (Copyright by 
D. C. Heath & Co. Used by permission of the publishers.) 



270 AGRICULTURAL ECONOMICS 

The socialists insist that capital is all wealth which serves to provide 
its possessor with an income independent of his labor. We must 
acknowledge that this definition harmonizes better with the general 
idea of capital, i.e., that which furnishes an income, but it evidently 
presupposes a specific economic and social organization, especially the 
fact that wealth may be loaned at interest or may be employed to give 
work to people who are glad to hire themselves out for wages. This 
particular social organization is of quite recent origin. The ruin of 
small industry and small farming, the expropriation of the masses, 
and the creation of a permanent class of wage-workers — all these 
things had to be accomplished before capital acquired the power to 
command the labor of others and to provide its owner with an income 
not due to any work of his own, unless we regard as work the task of 
watching over one's possessions and collecting profits. Socialists 
ridicule what might be called the naturalistic concept of capital, and 
substitute for it the historical concept, which regards capital, not as 
a permanent or necessary institution, but as the result of history. 

Now there is no necessary contradiction between these two 
theories, since the one regards capital in its natural, permanent, 
sociological characteristics, while the other considers its acquired, 
relative, historical nature. Both may be true, and, in fact, each of 
them contains part of the truth. It is certain that the part played 
by capital has been modified by economic evolution. First it was 
the simple tool of the manual laborer; later it gradually passed out of 
his possession and came into that of the wealthy members of society. 
Whereas it was at first simply an instrument of production it is now 
often made an instrument of money-making and the means of obtain- 
ing an income without working. This new state of society is what 
the socialists call " capitalism." But although it may be admitted 
that "capitalism" will some day disappear, capital will still remain. 

The definition given by the classical economists is therefore 
better, precisely because it emphasizes those features of capital that 
are essentially necessary, while the other definition points out only its 
accidental and ephemeral characteristics. The fact that no wealth 
can be produced without the help of pre-existing wealth is an economic 
law whose importance cannot be exaggerated. It is necessary to give 
a name to this pre-existing wealth, the function of which is so impor- 
tant and so well defined. We shall call it "capital." 

Any object having value may become capital, provided certain 
conditions are fulfilled. The idea of capital does not connote a cer- 
tain class or kind of goods, but a certain condition or purpose of goods. 



CAPITAL-GOODS AS A FACTOR IN PRODUCTION 271 

The feature, condition, or purpose that makes wealth capital is its 
productive use in conjunction with labor. The part played by capital 
in production has given rise to unfortunate misconceptions. It is 
customary to say that capital yields an income. This seems to be 
an essential part of its nature, just as trees naturally bear fruit or as 
hens naturally lay eggs. Hence the income provided by capital is 
regarded as a product due exclusively to capital. The spread of this 
false notion is due partly to the fact that a vast amount of capital is 
in the form of securities, bonds, or shares, with interest falling due 
every year or every six months. 

We must nevertheless abandon the idea of the natural produc- 
tivity of capital — an idea which has aroused the more or less justifi- 
able ire of the socialists. The mysterious productive and generative 
power, attributed to capital as part of its nature, is a pure chimera. 
Notwithstanding the popular belief to the contrary, money does not 
produce money nor does capital produce capital. Not only has a 
bag of money never produced a single cent, as Aristotle remarked long 
ago, but a bale of cotton or a ton of iron never has produced any cotton 
or iron. Capital is inert matter, and by itself is absolutely sterile. 
But when it is put in the service of labor, it gives labor a degree of 
productivity that may be very great. With a horse and plow, a 
farmer can produce more wheat than with his manual labor alone. 
It is this increased or supplementary crop that constitutes the income 
from capital. It does not arise from the plow; it is due to the man 
aided by the plow. 

Capital which can be used only once, because it is consumed in 
the act of production, is called circulating capital; examples of this 
kind of capital are: the wheat that is sown, manure that is mixed with 
the soil, coal that is burned, cotton that is spun. Capital that can 
be used to serve for several productive acts is called fixed capital; 
it may include the most fragile implements, such as needles, and the 
most durable kinds of wealth, such as canals or tunnels, which last 
as long as the world. 

81. MACHINERY AS A MEANS OF INCREASING THE EFFECT- 
IVENESS OF LABOR 1 

Barley (unit 3), oats (unit 13), rice (unit 17), rye (unit 18), and 
wheat (units 26 and 27) may be grouped under the head ''small 
grains" and considered together as to a number of operations. In 

1 Adapted from the Thirteenth Annual Report of the Commissioner of Labor, 
1898, pp. 84-87. 



272 AGRICULTURAL ECONOMICS 

seeding, a sack was the tool or implement used in all these units under 
the earlier method, the seed being sown broadcast and covered by 
the use of a brush, drag, or harrow. The time for sowing the seed 
was quite uniform, being, under the primitive method, i hour and 
25 minutes in units 3, 13, and 27; 1 hour and 22.5 minutes in unit 17; 
1 hour and 15 minutes in unit 26, and 1 hour in unit 18. Under the 
modern method a broadcast seeder was used in units 13 and 26, the 
sowing being done in 20 minutes and 15 minutes, respectively, or in 
about one-fourth and one-fifth of the time required by hand, as just 
shown. The subsequent harrowing to cover the seed occupied 50 
minutes and 12 minutes, respectively, in these units as against 2 hours 
and 50 minutes and 2 hours and 30 minutes under the earlier method. 
In unit 17 the seed was sown and covered at one operation in 55 
minutes as against a total of 3 hours and 12.5 minutes required for the 
work done in two operations under the more primitive method. The 
same conditions were found in unit 18 as in unit 17, the time being 
1 hour under the modern and 2 hours and 40 minutes under the 
primitive method. The greatest advance in these units is to be seen 
in those numbered 3 and 27, where, under the machine method, a 
combined gang plow, seeder, and harrow broke the ground, sowed and 
covered the seed,. and pulverized the topsoil at one operation. This 
was accomplished in unit 3 in 10 . 9 minutes, the power being a traction 
engine requiring the attention of two men, making the aggregate time 
21.8 minutes. In unit 27 the same work was done in 15 minutes, 
the aggregate time for the engineer and fireman necessary to run the 
machine being 30 minutes. Strictly speaking, the time of the water- 
hauler should be added, as he was necessary for the operation of the 
machines used. Adding this time and comparing it with total time 
required for the operations done separately by the primitive method, 
the time was 32.7 minutes under the modern as against 10 hours and 
55 minutes under the primitive method in unit 3, and 45 minutes as 
against 10 hours and 55 minutes in unit 27, a reduction to about one- 
twentieth and one-fifteenth the time required under the hand method 
in the respective units. This great saving is accounted for by the 
fact that the implement used under the modern method was a six- 
gang plow, each gang having 4 plows, each plow cutting 10 inches — 
total 240 inches — with a seeder and harrow attached to each gang, 
and all operated by a traction engine. This would seem to mark the 
limit of progress in this direction, and such machinery is obviously 
of profitable use only in a level country where farming is conducted 
on a large scale. 



CAPITAL-GOODS AS A FACTOR IN PRODUCTION 273 

The operation of harvesting was uniformly accomplished by the 
use of a sickle under the earlier method, the cutting and binding being 
done by hand. Comparisons cannot be made in all of the units, as 
the operations vary so much under the modern method. Three units 
show the use of self-binders and three the use of the combined reapers 
and thrashers which do away with the operations of binding and 
shocking the grain. In unit 13 the use of the self-binder reduced the 
time for cutting, binding, and shocking under the modern method to 
2 hours as against 16 hours and 40 minutes under the primitive, these 
operations under the primitive method requiring more than eight 
times as long as under the modern. In unit 17 the saving was still 
greater, the cutting and binding being done in 55 minutes under the 
modern as against 33 hours, or thirty-six times as long, under the 
primitive method by the use of sickles, no shocking being reported. 
The grain was shocked in unit 18, but the operation is kept separate, 
so that a comparison can be made as to the different operations. The 
cutting and binding required 1 hour with the self-binder, and 1 1 hours 
and 33 . 8 minutes with sickles, while the shocking required two hours 
under each method. The more complex machines reported in units 3, 
26, and 27 were propelled by steam in units 3 and 27, and by 26 
horses in unit 26. Here the grain was reaped, thrashed, and sacked 
in one continuous operation. In unit 3 the operations necessary to 
do this work under the earlier method required 48 hours and 40 
minutes, while under the later method the time required by the 
machine was 7 . 5 minutes, 7 men being employed, making the total 
time 52.5 minutes; including the time of the two water-haulers, for 
the same reason as noted in discussing the combined plow and seeder, 
the total time under the machine method was 1 hour and 7 . 5 minutes, 
or about one forty-third the time required when sickles and flails were 
used. In unit 27 the totals are 49 hours and 20 minutes under the 
earlier method and 1 hour and 21 minutes under the later. The totals 
in unit 26 show the best proportionate results from the use of the 
combined reaper and thrasher, being 46 hours and 40 minutes under 
the earlier and 1 hour under the later method. The time for binding 
and shocking grain and stacking straw is included in the time for the 
hand methods given above (units 3, 26, and 27), which operations 
were not necessary under the machine method. 

Thrashing is reported as a separate operation in units 13, 17, 
and 18. In units 13 and 18 the work was done under the earlier 
method entirely by hand, the flail, pitchfork, shovel, and winnowing 



274 AGRICULTURAL ECONOMICS 

sheet being the tools used, while in unit 17 a horse-power thrasher 
was used in 1870. This thrasher took 13 hours and 17.5 minutes to 
do the work done by the steam thrasher in 2 hours and 37.5 minutes. 
In unit 13, under the hand method, the thrashing required 41 hours 
and 5 minutes as against 1 hour and 16.8 minutes, the time required 
by the use of the modern thrasher (including the time charged to 
hauling water) — a ratio of more than 32 to 1 in favor of the machine. 
In unit .18, the time required under the earlier and later methods, 
respectively, was 26 hours and 45 . 1 minutes and 7 hours. This dis- 
proportionately long time required (7 hours) is explained in part by 
the fact that the length of the rye straw made the work much slower 
than with other grains, and in part by the fact that the rye being 
thrashed from the barn mow, more men were necessary than if it 
had been thrashed from wagons. The actual running time of the 
thrasher in this case was 30 minutes. 

This group presents a comparison of extremes, the appliances 
being entirely changed throughout in some of the units, showing a 
more complete supplanting of hand by machine labor than can be 
found, perhaps, in any other line of agriculture. These changes have 
taken place in the past sixty-five years, as indicated by the dates given 
by these units, though in fact most of them have occurred in a much 
shorter period. In units 3 and 27 the number of operations is prac- 
tically reduced to two, and it is in these units that the greatest aggre- 
gate saving was effected, the total time in unit 3 being 63 hours and 
35 minutes under the earlier and 2 hours and 42.8 minutes under the 
later method — a ratio of more than 23 to 1 in favor of the modern 
method; while in unit 27 the respective totals are 64 hours and 15 
minutes and 2 hours and 58.2 minutes — a ratio of nearly 22 to 1. 
These results are the best shown in this industry. 

82. THE RELATION OF FARM CAPITAL TO LABOR INCOME 1 
By E. H. THOMSON and H. M. DIXON 

In the course of a farm-management survey of three representative 
areas in Indiana, Illinois, and Iowa, records were secured from 247 
tenant farmers. These men made an average labor income of $870 
from an investment of less than $2,500. When it is remembered that 
the farm-owners with over 12 times this investment made less than 
half the labor income of the tenants, the evidence is unmistakable that 

1 Adapted from Bulletin 41, United Slates Department of Agriculture, pp. 11-13. 



CAPITAL-GOODS AS A FACTOR INTRODUCTION 



275 



the man with small capital should rent rather than buy a farm. For 
the amount invested, the tenant's income is much greater than that 
of the farm-owner. The sum available for the family living, however, 
is much smaller in the case of the tenant, for the farm-owner, with an 
average capital of $30,606, has $1,530 interest to use, as well as the 
$408 labor income. Thus, if the farm-owner is free of debt, as one- 
half of them are, he has $1,938 available for a living, as compared with 
the tenant's $992. 

Turning to farms operated by owners, we find that the relation 
of capital to labor income on 273 such farms was as follows: 



Capital 


Number of 
Farms 


Average 
Labor 
Income 


Capital 


Number of 
Farms 


Average 
Labor 
Income 


$ 5,000 and less. . 
5, 001-$ 1 0,000. . 
10,001- 15,000. . 
15,001- 20,000. . 
20,001- 30,000. . 
30,001- 40,000. . 


9 

37 
44 
45 
55 
32 


$ 74 
45 
283 
265 
264 
483 


$40,00 i-$6o,ooo. . 
60,001- 80,000 . . 
80,001 and over. 

Average 


29 
IO 
12 


$ 315 
1,114 
1,804 




$ 408 







The chance of a farm-owner making a labor income of $1,000 with 
less than $15,000 invested is less than 1 in 20. It may be also noted 
that the farm-owners showing the greatest losses (minus labor income 
of $500 or more) had nearly as much capital invested as did those 
securing labor incomes of $2,001 and over. This shows clearly 
the penalties that follow an injudicious or unfortunate outlay of 
capital. 

As to the relation of tenants' capital to their labor incomes, it is 
interesting to observe that farmers having less than $1,000 of capital 
secured very small labor incomes ($324 and $799 for the two groups), 
whereas farmers better equipped with capital were able to secure labor 
incomes of from nearly $1,000 to nearly $3,000. However, the 
increase in labor income is less than proportionate to increase in 
capital after the $1,501 to $2,000 group is passed. This goes to show 
that for efficient use of capital-goods in the corn belt a rather expansive 
.type of farming is needed. Farms with less than 100 acres in crops 
are not utilizing horse labor nearly as efficiently as the larger 
places. 

Note. — Figures of a similar nature are given by Warren and 
Livermore in Bulletin 2Q$ of the Cornell Experiment Station. All 
these data are open to the objection, for our present purpose, that in 



276 



AGRICULTURAL ECONOMICS 



the case of farm-owners capital is made to include real estate. The 
Cornell tables follow. — Editor. 

TABLE IX 

Relation of Capital to Profits. 615 Farms 
Operated by Owners 



Capital 


Number of 
Farmers 


Percentage of 

the Farmers 

Making Labor 

Incomes of 

Less than 

$401 


Percentage of 
the Farmers 

Making Labor 
Incomes of 
over $1,000 


Average 
Labor Income 


$ 2,000 or less 

2,001-$ 4,000. . . 
4,001- 6,000. . . 
6,001- 8,000. . . 
8,001- 10,000. . . 
10,001- 15,000. . . 
Over 15,000 . . . 


200 
183 
94 
45 
44 
13 


81 

75 
59 
40 

38 
30 
3i 


O 
O 

8 

14 

22 

32 
46 


$ 192 
240 
399 
53o 
639 
870 
1,164 



TABLE X 

Relation of Tenants' Capital to Profits. 134 
Farms 



Tenants' Capital 


Number of 
Farms 


Average 
Labor Income 


$ 500 or less 


12 
45 
43 
15 
16 

3 


$282 

309 

342 
356 
670 
880 


5oi-$i,ooo 

1,001- 1,500 

1,501- 2,000 


2,001- 3,000 

Over 3,000 







B. The Increase in Capital Employed in American Agriculture 

83. CONCERNING THE INCREASED USE OF POWER 
MACHINERY ON THE FARM 1 

The year 1850 practically marks the close of the period in which 
the only farm implements and machinery, other than the wagon, 
cart, and cotton gin, were those which, for want of a better designa- 
tion, may be called implements of hand production. The old cast- 
iron plows were in general use. Grass was mowed with the scythe, 
and grain was cut with the sickle or cradle and thrashed with the 

1 Adapted from Twelfth Census of the United States, Vol. V, pp. xxix-xxxi. 



CAPITAL-GOODS AS A FACTOR IN PRODUCTION 



277 



flail. The last half-century has witnessed a revolution in agricultural 
methods, and the new implements and the machines introduced would 
require more than a page to catalogue. 

Tables XII and XIV present figures showing the increase in the 
value of farm machinery in the various sections from 1850 to 1900. 



TABLE XII 

Value of Farm Implements and Machinery in the United States, with 

Increase and Percentage of Increase by Decades: 

Summary 1850 to 1900 



Census Year 



Value of Farm 

Implements and 

Machinery 



Increase by Decade 



Percentage of 
Increase 



1900 
1890 
1880 
1870 
i860 
1850 



$761,261,550 
494,247,467 
406,520,055 
270,913,678 
246,118,141 
151,587,638 



$267,014,083 

87,727,412 

I35,6o6,377 

24,795,537 

94,530,503 



54-o 
21.6 
5o.i 
10. 1 
62.4 



TABLE XIV 

Average Value of Implements and Machinery per Acre of Farm Land, by 
Geographic Divisions: Summary 1850 to 1900 



Geographic Divisions 


1900 


1890 


1880 


1870 


i860 


1850 


The United States 


$0.90 


$0.79 


$0.76 


$0.66 


$0.60 


$0.52 


North Atlantic 

South Atlantic 

North Central 

South Central 


2-34 
0.51 

ii5 

0.49 
0.56 


1.86 
0.36 
0.98 

o.37 
0.64 


1-58 
0.30 
1. 00 

o.35 
0.60 


1-43 
0.22 
0.89 
0.30 
0.48 


1. 21 
0.32 
0.67 
0.52 
o.33 


0.98 
0.26 

o.57 
o.47 


Western 







The values of farming implements on hand at the date of census 
enumeration increase in each decade since 1850 in the North Atlantic, 
North Central, and Western divisions, while in the South Atlantic 
and South Central states they show a decline of $14,020,511 and 
$31,435,478, respectively, in the decade i860 to 1870, reflecting the 
disastrous effect of the Civil War. After 1870 the values increased 
in both these divisions, but not until 1890 did the aggregate of such 
gain suffice to give the South Atlantic division as large a reported 
value of this class of farm property as it had in i860; and in the South 
Central states, notwithstanding the great growth of population, the 



278 



AGRICULTURAL ECONOMICS 



farmers did not, until 1900, report as large investments in machinery 
as they did prior to the war. 

For the United States the value of machinery per acre of farm 
land has increased since 1850 from $0.52 to $0.90, or nearly 80 per 
cent, and since 1880 from $0 . 76 to $0 . 90, or about 20 per cent. These 
increases in money value, however, do not measure the added useful- 
ness of the new machinery. That is measured principally by the 
degree to which the machinery saves human labor by substituting the 
power of animals or of steam. It is interesting, therefore, to inquire 
what changes have been made in the past fifty years in the use of 
animal power on farms in connection with these new machines. A 
comparison of human and animal labor on farms in relation to the 
acreage of crops cultivated can be made only for the period since 1880. 
Table XV makes a comparison between the number of males engaged 
in agriculture, the number of draft animals on farms, and the acreage 
of all crops reported at the last three census dates. 

TABLE XV 

Number of Males in Agriculture, Number of Horses, Mules, and Asses 

on Farms, and Area of Land Devoted to Specified Crops, 

with Averages: Summary 1880 to 1900 



Items 


1900 


1890 


1880 


Number of males in agriculture 

Number of horses, mules, and asses . . . 

Acres of land and specified crops 

Average number of acres to one male 
worker 


8,771,181 

20,099,826 

272,304,111 

31.0 

13-5 

2-3 


7,787,539 

17,264,999 

2i4,5 2 3,4i2 

27-5 

12.4 

2.2 


7,075,983 

12,170,296 

164,830,442 

23-3 

13-5 

i.7 


Average number of acres to one horse, 
etc 


Average number of horses to one male 
worker 





The number of acres of leading crops per male worker steadily 
increased, while the number per working animal was substantially the 
same in 1900 as in 1880. The increase in productiveness of man's 
labor, therefore, is secured by the increased utilization of the power 
of the horse and the mule in driving farm machinery. The figures of 
the table indicate two important changes in the twenty years. One 
of these appears in the increase in the number of horses to each male 
worker from 1.7 to 2.3, a gain of about 35 per cent; the other is the 
increase in the number of acres cultivated to each male worker from 



CAPITAL-GOODS AS A FACTOR IN PRODUCTION 



279 



2 3-3- to 31.0, or about 34 per cent. From these figures it appears 
that in the last twenty years, by the aid of machinery, and the substi- 
tution of horse power for hand labor, the effectiveness of human labor 
on farms has been increased to the extent of about 33 per cent. 



84. FARM BUILDINGS, FARM MACHINERY, AND LIVE 
STOCK— 1900 TO 19 io 1 

Table VII shows, by geographic divisions and sections, the value 
of farm property of various classes, together with the amounts and 
percentages of change between 1900 and 19 10. 

TABLE VII 





Value of Buildings 


Division or Section 


1910 


1900 


Increase 
Percentage 


United States 


$6,325,451,528 


$3,556,639,496 


77-8 




New England 


336,410,384 

980,628,098 

1,642,292,480 

1,562,104,957. 

603,086,799 

411,570,975 
412,498,352 
145,026,777 
231,832,706 


244,806,945 
729,069,850 
939,573,660 

758,405,725 
306,528,682 
•225,627,372 
185,105,506 
54,554,862 
112,966,894 


37-4 

34-5 

74.8 

106.0 


Middle Atlantic 


East North Central 


West North Central 


South Atlantic 


96.7 
82.4 


East South Central 


West South Central 


122.8 


Mountain 


165.8 
105.2 


Pacific 







Value of Implements and Machinery 


Division or Section 


1910 


1900 


Increase 
Percentage 


United States 


$1,265,149,783 


$749,775,970 


68.7 


New England 


50,798,826 
167,480,384 
268,806,550 
368,935,544 
98,230,147 
75,339,333 
119,720,377 

49,429,975 
66,408,647 


36,551,820 
116,253,270 
166,694,220 
197,367,840 

53,318,890 

48,767,235 
77,925,050 
18,807,620 
34,090,025 


39-0 
44.1 

61.3 
S6.9 

S4.2 


Middle Atlantic 

East North Central. .' 

West North Central 

South Atlantic 


East South Central 


54-5 
S3<5 

1(32. 8 


West South Central 


Mountain 


Pacific 


94- s 





Thirteenth Census of the United States, Vol. V, pp. 41-47. 






280 



AGRICULTURAL ECONOMICS 
TABLE VII— Continued 





Value of Live Stock 


Division or Section 


ioio 


1900 


Increase 
Percentage 


United States 


$4,925,173,610 


$3,075,477,703 


60 I 






New England 


97,896,823 

349,159,535 
976,329,922 
1,551,708,097 
366,534,152 
369,034,607 
589,837,078 
388,746,520 
235,926,876 


74,826,332 
245,635,518 
604,633,707 
972,343,643 
194,362,808 
213,320,732 

403,138,495 
243,836,888 
123,379,580 


30.8 
42.I 

61.5 
59-6 
88.6 


Middle Atlantic 


East North Central 


West North Central 


South Atlantic 


East South Central 


73-0 
46.3 
59-4 
91.2 


West South Central 


Mountain 


Pacific 





More significant than comparisons between states, divisions, and 
sections, with respect to the total value of farm property, are com- 
parisons of the average value of farm property per acre of land in 
farms. In making such comparisons, however, it should be borne in 
mind that they are made on the basis of all land in farms and not of 
improved land in farms, so that those sections and states in which 
improved land constitutes the greater proportion of all land in farms 
will for the most part show the greatest value per acre of land in 
farms. Table VIII shows, for each geographic division and section, 
the average value of farm property of these three classes per acre of 
land in farms, together with amounts and percentages of change 
between 1900 and 19 10. 

The several divisions differ much more widely in average value of 
buildings per acre of land in farms than in average value of land alone 
per acre, the amounts for the former item ranging in 19 10 from $2 . 44 
in the West South Central and Mountain to $22 . 70 in the Middle 
Atlantic division. The three northeastern divisions, the New Eng- 
land, Middle Atlantic, and East North Central, reported a much 
higher value of buildings per acre of farm land than any of the others. 
There is also a wide diversity in the average value of implements and 
machinery per acre of land in farms; it ranged in 19 10 from $0.71 
in the West South Central division to $3 . 88 in the Middle Atlantic. 
Here, again, the three northeastern divisions ranked very much 
higher than the others, because of the high percentage of farmland 
improved and the more advanced and intensive methods used in the 
cultivation of the land, requiring a larger relative outlay for modern 



CAPITAL-GOODS AS A FACTOR IN PRODUCTION 



281 














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282 AGRICULTURAL ECONOMICS 

machinery. In the South, where cotton, for which harvesting 
machinery is not required, is the principal crop, the average value of 
implements and machinery per acre of land is naturally low. Much 
less difference appears among the several divisions with respect to the 
average value of live stock per acre, the maximum being $8 . 28 for the 
East North Central division and the minimum $3.49 for the West 
South Central. 

In considering the increases reported in the average value of the 
various classes of farm property, per acre of land in farms, it should 
be borne in mind that in the Southwest and West a large acreage of 
land reported as farms in 1900 was not so reported in 19 10, although 
there was not necessarily any actual or at least any material change 
in the extent to which such land was in fact used for agricultural pur- 
poses. This change tends to exaggerate the increase in average values 
per acre. 

The highest rates of increase in the average value of buildings per 
acre were in the West South Central division, 132.4 per cent; the 
Mountain, 106.8 per cent; the South Atlantic, 97.6 per cent; and 
the Pacific, 89 . 9 per cent. In every state the average value of build- 
ings per acre of land in farms was higher in 19 10 than in 1900; in 
Arizona and Oklahoma it was more than three times as great; and 
in 16 other states it was more than double. The country as a whole 
shows an increase between 1900 and 19 10 of 52.6 per cent in the 
average value of live stock per acre of land in farms. The highest 
percentage of gain was in the South Atlantic division, 89 . 8 per cent, 
while the lowest was in the Mountain division, 24 . 1 per cent. Among 
the states the highest rate of increase, 160.3 P er cent > was shown in 
Arizona; and in three other states, Georgia and the two Carolinas, 
the value more than doubled during the decade. The only states 
showing a decline were New Mexico (37.5 per cent) and Colorado 
(1 . 7 per cent). The actual value of the live stock in both these states 
was much greater in 19 10 than in 1900, but the acreage of farm land 
increased in still greater ratio. 

The average value of implements and machinery per acre of all 
land in farms has been given. The use of implements and machinery, 
however, is largely confined to improved farm land and more par- 
ticularly to that portion occupied by crops. The average value of 
implements and machinery per acre of improved land in farms in 19 10 
was much higher in the New England and Middle Atlantic divisions 
than in any other and was lowest in the East South Central division. 
The average value based on land in crops was also highest in the two 



CAPITAL-GOODS AS A FACTOR IN PRODUCTION 283 

northeastern divisions, followed by the Pacific and Mountain divisions, 
and was again lowest in the East South Central division. Disregard- 
ing the District of Columbia, the highest average value of implements 
and machinery per acre of improved land in farms appeared in the 
states of Rhode Island and Massachusetts; outside of the New Eng- 
land and Middle Atlantic divisions the highest averages were in Ari- 
zona, Delaware, and Wisconsin, the high average in Arizona being 
doubtless attributable to the importance of the cultivation of irrigated 
lands. Between 1,900 and 19 10 the average value of implements and 
machinery per acre of improved farm land more than doubled in 
Louisiana and South Carolina, while the average value of land in 
crops more than doubled in Louisiana and California, and exactly 
doubled in South Dakota. The lowest rate of increase in the value 
of implements and machinery per acre of land in crops was in New 
Mexico, and the same state showed the only decrease (20. 2 per cent) 
in their value per acre of improved land. 

85. A CONCRETE CASE 1 

Mr. J. M. Ward, of Limestone, Maine, enumerates the necessary 
machinery for potato growing as follows: 

2 sulky plows. $100 

2 spring-tooth harrows 25 

1 planter 65 

1 two-row riding cultivator 45 

1 horse hoe for hilling 10 

1 four-row sprayer 65 

1 digger 100 

Total $410 

This equipment, with the addition of one wagon of the type 
known as a jigger, is operated by two men and four heavy horses. 
The two men with this equipment are able to prepare for, plant, and 
handle 50 acres of potatoes up to digging time, when they require six 
or seven day hands to pick up the potatoes. This, of course, is an 
expensive equipment compared with that formerly used on the potato 
crop, which was as follows: 

1 walking plow $15 

1 harrow 15 

1 horse hoe 10 

Hand hoes 3 

Total $43 

'Farmer's Bulletin 365, p. 13. 



284 AGRICULTURAL ECONOMICS 

Without question the additional outlay increases the acreage 
which two men can handle just about in proportion to the increase 
in cost. 



C. Giving Capital Outlays Their Greatest Effectiveness 

86. THE EFFICIENCY OF CAPITAL-GOODS AS RELATED TO 

SIZE OF FARM 1 

By G. F. WARREN 

Three or four horses are the smallest number that can be used 
efficiently with modern machinery. A survey of 586 farms in Tomp- 
kins County, New York, shows those of 151 to 200 acres to be the 
smallest ones that have an average of four horses per farm. The 
farms of less than 30 acres average 1.4 horses per farm. The 
figures of acres per horse are still more striking. The small farms have 
not enough horses to make efficient teams and yet they are over- 
supplied with horses compared with their area. On these farms there 
are only 15 acres per horse. On the largest farms, one horse farms 
three times this area, with no resulting decrease in crop yields. When 
we consider the cost of keeping a horse we see what a great advantage 
the larger farmers have. 

According to the United States Census (Twelfth), the area farmed 
per man has increased one-third in the past twenty years. This 
increase has been due to the use of more horses per team, increasing 
the acreage that he could farm in the same ratio. At the same time 
the crop yields of the country have increased. The most striking 
examples of the use of four- to six-horse teams are in the Middle West. 
In some cases, as in Iowa, this has resulted in a decrease in rural 
population. At the same time total production has increased. One 
man is often farming as much land as two men farmed a few years 
ago and doing it better. 

The figures showing relative efficiency of horses are as given in 
Table XXXIII. 

The case as to farm machinery is similar. The value of farm 
machinery is only $341 for farms of 61-100 acres. These valuations 
are probably not over half of what new machinery would cost. Any- 
one who has ever made a list of the necessary farm machinery will see 
at once how inadequately these small farms are equipped. Yet their 
machinery cost nearly twice as much per acre as that on the larger 

1 Adapted from Bulletin 2Q5, Cornell Experiment Station, pp. 419-21. 



CAPITAL-GOODS AS A FACTOR IN PRODUCTION 



285 



farms that have nearly three times as much machinery. Machinery 
can be used more effectively on large farms. One mower, one hay 
rake, one tedder, one hay loader, one corn harvester, one grain har- 
vester, one grain drill, one manure spreader, one potato digger, one 

TABLE XXXIII 

Size or Farm Related to Horses. 586 Farms 
Operated by Owners 



Acres 


Average Size 
(Acres) 


Average 

Number of 

Horses 


Acres per 
Horse 


30 or less 

31— 60 


21 

49 

83 

124 

177 

261 


1.4 

2-3 

2.8 ' 

3-4 
4-3 
5-3 


IS 
21 


61—100 


30 

37 
4i 
49 


101— 150 


151—200 


Over 200 


Average 


103 


3-i 


33 



potato planter, can do their work on a 250-acre farm as readily as on a 
small farm. Few of the small farms have half of these tools. If a 
small farm does have nearly all the list, it cannot use them enough to 
pay for the investment. The more efficient and numerous machines 
become, the larger our farms should be. It is interesting to note how 
many of the tools are of very recent development. Almost half the 
value of farm machinery on a well-equipped farm is invested in 
machinery that has been perfected in the last few years. 

In each of the groups the farmer's labor income is almost the same 
as the value of his machinery. 



TABLE XXXIV 

Size or Farm Related to Machinery and Tools. 586 
Farms Operated by Owners 



Acres 


Average Size 
(Acres) 


Value of 

Machinery and 

Tools 


Acres Farmed 

with $100 Worth 

of Machinery 

and Tools 


30 or less 


21 

49 

83 

124 

177 

261 


$125 
243 
341 
495 
592 
914 


17 
20 


31- 60 


61-100 


»4 

25 
30 
29 


101— 150 


151-200 


Over 200 




Average 


103 


$407 


25 



286 



AGRICULTURAL ECONOMICS 



The 1 small farm has relatively more of its capital invested in 
unproductive ways than does the large farm. No matter how small 
the farm may be, the owner desires a respectable house. Table XII 
shows that the smallest farms have 43 per cent of their capital in 
houses; the largest farms have somewhat better houses, but have 
only 9 per cent of their capital thus invested. 



TABLE XII 

Area Related to Investment in Buildings. 578 Farms, Livingston County, 

New York 



Acres 



Value of 
Houses 



Percentage of 

Total Capital 

in Houses 



Value of 

Other 
Buildings 



Percentage of Value of 
Total Capital Other 
in Other Buildings per 
Buildings Animal Unit 



30 or less 
3i- So. . 
51-100. . 

101-150. . 

151-200. . 

Over 200. 



$1,494 
1,000 
1,236 

i,477 
1,810 

2,113 



43 
23 
18 

14 

13 

9 



? 655 

681 

1,091 

1,408 
1,900 
2,552 



19 
15 
16 

13 
13 
11 



$164 
95 
87 
74 
73 
50 



Similarly for barns, the smallest farms have 19 per cent of their 
capital thus invested, whereas the largest farms have only 1 1 per cent 
thus tied up. An equally good barn for 10 head of stock cost much 
more than half as much as a barn for 20 head of stock. The largest 
farms have only an investment in barns of $50 per animal unit, yet 
observation leads to the conclusion that the stock on the larger places 
is better housed than on the smaller farms, where the expense per 
animal unit runs as high as $164. If interest, repairs, depreciation, 
and insurance on a building amount to 10 per cent of the value, then 
the housing cost per animal unit will vary from $16 per year on the 
smallest farms to $5 per year on the largest. Figures from the Thir- 
teenth Census indicate that these conditions are general. Farms of 
less than 20 acres have 36 per cent of their capital invested in buildings 
and machinery. Those of 100 to 174 acres have only 17 per cent of 
the money thus invested, yet they have much better buildings and 
more machinery. 

1 The remaining paragraphs of this reading are from Bulletin 341 of the same 
station, and are by the same author. 



CAPITAL-GOODS AS A FACTOR IN PRODUCTION 287 

87. THE PROPER APPORTIONMENT OF CAPITAL OUTLAYS 1 

By L. W. ELLIS 

Successful farm management presupposes a proper relation 
between the various factors of production. The study of farm equip- 
ment was undertaken for the purpose of determining from the study 
of successful farms the relationship that should exist between invest- 
ments in land, improvements, live stock, machinery, and tools. The 
farms from which data are embodied in this report are probably above 
the average type in the character of the proprietors, method, and 
equipment, yet they are not necessarily examples of exceptionally 
successful management. Of the 21 farms studied, 6 include dairying 
as the principal enterprise, 1 is devoted largely to feeding sheep, and 
2 others place greater emphasis on the feeding of cattle than the aver- 
age farm, but in no instance are the equipment and management 
those of a highly specialized type of farm. They represent, on the 
whole, the most common type of farm to be found in the state. 

First we will examine the present distribution of investment as 
shown by the inventory. The appraisement of the value of perma- 
nent improvements was extremely difficult and the values given must 
be accepted with due allowances. In this study the building values 
are a compromise between the cost of equipping the farm with similar 
structures, less a proper amount of depreciation, and the sale value of 
the buildings as suggested by comparing the values of land with and 
without buildings. 

It can safely be said that buildings represent, not only the most 
expensive class of farm equipment, but the least negotiable. Leaving 
out household buildings, the remainder on the farms studied shows a 
much greater variation in investment per acre than any other class of 
equipment, and a greater variation in percentage of the total invest- 
ment than land, water supply, live stock, or machinery. Fences, 
artificial drainage, and water systems may often be dispensed with 
wholly or to a great extent; hence they are scarcely comparable with 
land, buildings, live stock, and machinery as regards the relative 
investment. 

One of the most important phases of a study of farm equipment 
is the determining of the relation that should exist between buildings 

1 Adapted from "A Study of Farm Equipment in Ohio," Bulletin 212, Bureau 
of Plant Industry, United States Department of Agriculture, pp. 7-53. 



288 



AGRICULTURAL ECONOMICS 



and the farm enterprise, in order to reduce the wide variation in invest- 
ment per acre in buildings designed for the same purposes. Prior to 
a study of the cost and construction of buildings there should be 
established standard space units to be used in determining the actual 
building requirements of the farm for the storage of products and 
machinery, the housing of live stock, and the transaction of the farm 
affairs. 

As a basis for comparing the individual farms the mean and the 
average of the data from 21 farms are both included. The mean is 
obtained by adding together the figures per acre for the 2 1 farms and 
dividing by 21, while the average is computed by taking the total 
investment for the 21 farms and dividing by the sum of their acreages. 
The mean, then, is an average having the farm as a unit, while the 
average regards the acre as the unit. In this study of farms the mean 
is regarded as the more suggestive, since it takes into account the 
effect of the size of the farm upon the acre investment. 

The results are given in the accompanying table. 



Land 

Farm buildings 

Household buildings . 

Fences 

Drainage 

Water supply 

Live stock 

Machinery, etc 

Produce, supplies, etc 




An examination of the figures for individual farms will show the 
range of investment per acre in farm buildings to be from 67 cents on 
farm 24, where a very old barn and several equally old sheds, etc., 
constituted the building equipment, to $32. 25 for farm 25, where the 
value of a small barn and poultry house is divided by a small acreage. 
The investment varies with the number and condition of buildings, 
but the number and cost do not vary with the acreage. 

Farms 13 to 17 are similar in character and location, yet the 
building equipment of farm 13 is $11.35 P er acre, while on Nos. 14 
to 17, inclusive, the valuation does not reach $5 per acre on any farm. 
This is due to the fact that farm 13 is really composed of three farms 



CAPITAL-GOODS AS A FACTOR IN PRODUCTION 289 

formerly separate. On the other hand, farms 3, 5, 12, 18, 19, 
and 28, ranging in size from 104 to 504 acres, show an invest- 
ment in farm buildings of $15.78 to $26.85 P er acre > while 
farms 7, 8, 10, and 30, varying in size from 49.61 to 100 acres, 
have an investment in farm buildings of but $6.33 to $12.70 per 
acre. 

In household buildings (dwellings) there is a variation from $4 . 07 
to $46.09 per acre. The 21 farms as a whole have practically the 
same investment in farm buildings ($10. 59 per acre) and in household 
buildings ($10. 16 per acre), but individual cases show wide extremes. 
The owner of farm 24 ($0. 67 per acre for farm buildings and $5 . 39 for 
household buildings) realized his lack of the former and contemplated 
erecting a new barn in the near future. On the other hand, the 
owner of farm 30 ($6.33 per acre fox farm and $31 .64 for household 
buildings) had recently moved from the city and had put most of 
his ready capital into remodeling the dwelling. He admitted that 
this outlay had prevented him from buying certain essential farm 
machinery. 

The acre investment in tile drainage and water supply depends 
largely on the natural advantages of the farm. In several cases the 
small size of the farm makes the acre investment in water systems 
large, even though the systems are not extensive. Two of the farms 
with high bare-land values also show highest valuation of tile drainage. 
Here, thorough drainage is undoubtedly a large factor in maintaining 
the value of the land. 

With the exception of 4 farms the acre investment in machinery, 
wagons, harness, tools, etc., ranges within comparatively narrow 
limits (from $2.87 for farm 13 to $7 . 56 for farm 28) . The four excep- 
tions are farm 22 (acre valuation $2.22), for which much of the 
machinery was borrowed; farm 24 (acre valuation $1. 17), for which 
machinery was generally bought second hand; and farms 7 and 25 
(valuations $12 . 70 and $14 . 39), which are low in acreage. With the 
exception of farms 22, 24, 25, and 28, the total machinery investment 
per farm varies only about 136 per cent, as compared, for instance, to 
1,275 P er cen t for the total value of farm buildings and 835 per cent 
for household buildings. Two large farms, containing 342 and 388 . 92 
acres, respectively, show low acre investments in machinery ($3 . 14 
and $2.87, respectively), while farm 28, the largest, containing 504 
acres, ranks among the highest, showing an acre investment of $7.56 
and indicating overequipment. 



290 AGRICULTURAL ECONOMICS 

Turning to a critical analysis of these data, it is impossible to make 
a general recommendation as to equipment, owing to the complex and 
varying combinations of enterprises on different farms. The great 
variations in the tastes and circumstances of farm-owners is largely 
responsible for the variations in the cost of household buildings, and 
it is almost impossible to arrive at a satisfactory basis for determining 
the proper outlay in this respect. But it is possible to plan a prac- 
ticable set of farm buildings which almost exactly fit the conditions 
of the average farm under consideration (165 . 88 acres). A basement 
barn 36 by 60 feet provides 2,160 square feet of floor space for the 
housing of cattle, horses, and sheep, with space for storage of hay, 
grain, and machinery above. Where a basement barn is not prac- 
ticable a second building may be provided for the storage of hay and 
the shelter of a part of the live stock. Besides the grain room in the 
basement barn there is needed a double crib or combination of crib 
and granary with a driveway between, which, when inclosed by doors 
at either end, may be used as a convenient wagon or buggy shed. A 
building 20 by 28 feet and 10 feet in height, with an 8-foot gable, is 
suggested, and another building 22 by 30 feet and 12 feet to the eaves 
will be called for as a machinery shed and workshop. Finally, there 
may be separate hog house, poultry house, silo, potato cellar, or other 
miscellaneous buildings demanded by the special character of the 
farm. 

The data indicate that 4 work horses, 2 head of young stock, 
and either a driving horse or brood mare, which may occasionally 
be worked, are about the average requirements as to horses. 
Six farms on which dairying is the principal enterprise kept, alto- 
gether, 95 milch cows, and on ten other farms there were 29 milch 
cows. 

In making up a list of machinery for the average farm so many 
factors enter into consideration that a generalization is of little value. 
Of the 21 farms, all reported a walking plow, a spike- tooth harrow, 
a farm wagon and box, and a mower; 19 had a sulky hayrake; 18 had 
hayrack, grain binder, and i-horse cultivator; 17 had 2- or 3-horse 
cultivators. Outside of these nearly indispensable articles, every farm 
had some items of equipment whose importance was due to the par- 
ticular character of their crops — 2 Babcock testers, 4 potato planters, 
6 sap evaporators, etc. 

The general distribution of outlays among land, improvements, 
and equipment may be summarized as follows: 



CAPITAL-GOODS AS A FACTOR IN PRODUCTION 291 

Land, 165 . 88 acres at $46 . 25 (average) . . $7,676 . 42 

Farm buildings 2,700. 00 

Household buildings 2,500. 00 

Fences 763 . 74 

Drainage 366.43 

Water supply 225 . 00 



$14,231.59 



Work animals 640. 71 

Colts and driving horses 250. 95 

Cattle . .. 582.26 

Sheep 201 . 05 

Swine 158.34 

Poultry 52 . 60 

Bees 3 . 23 

Harness 131-05 

Machinery : 1,125.48 

Minor articles 200. 00 

Produce, supplies, etc 631 . 93 



3,977.60 



In actual practice innumerable factors tend to reduce the cost of 
equipping farms. Few farms in the older sections of the United 
States, like Ohio, are equipped outright with new buildings, fences, and 
machinery, and the foregoing summary would, of course, apply only 
to these farms; but the table is of interest in showing the amount of 
money spent during a series of years in bringing the equipment up 
to a profitable working basis. Proper organization, a prerequisite to 
successful farm management, refers not only to the cropping system, 
live-stock management, etc., but to the distribution of capital and 
the selection of equipment. This study of a number of Ohio farms 
does not afford sufficient data from which to draw general conclusions, 
but illustrates by concrete example many of the factors to be taken 
into consideration in equipping farms. 

88. OVERINVESTMENT IN BUILDINGS AND MACHINERY 1 
By G. F. WARREN 

In Livingston County, the investment in houses represents 14 per 
cent of the total capital in the farm business, including real estate, 
equipment, live stock, and supplies. Certainly, one should hesitate 

x From "Some Suggestions for City Persons Who Desire to Farm," Circular 
No. 24, Agricultural Experiment Station of the College of Agriculture, Cornell Uni- 
versity, pp. 35-36. 



292 AGRICULTURAL ECONOMICS 

to build a new home that represents much over a fifth of the 
capital. The house may be said to be a personal matter, but if the 
investment goes much beyond this, it is too valuable a house for 
the farm. 

The average cost of barns per cow or equivalent in other animals 
was $70 in Livingston County. One who spends over $100 per cow 
should be sure that he is right. The interest, repairs, taxes, insurance, 
and other costs on such a building amount to about 8 to 10 per cent. 
The above limit would make an annual cost of $10 per cow for barn 
rent. One set of barns were built not long ago which were intended 
to be model barns for the neighbors. They cost $65,000 and were to 
house 65 cows. The barn rent per cow would be $100 a year. It 
takes a good cow to give $100 worth of milk at wholesale prices. 
There are many such examples in this state. Nearly all the so-called 
model barns are so expensive as to be impossible on a business farm. 
Henhouses ought not to cost much over $1 per hen. At this cost, the 
hen must lay a half-dozen eggs to pay her house rent. Many of the 
big poultry farms have such expensive buildings that the plant cannot 
possibly pay. 

The danger of overinvestment in machinery is even greater, for 
there are skilled agents whose business it is to make sales. The 
average farm in Livingston County has an investment in machinery 
of $6 per acre of crops. Many a farm of an amateur has ten times 
this amount. The machinery on a general farm ought not to cost 
over $10 per acre of crops. The complete cost of maintenance, 
housing, interest, repairs, and depreciation on farm machinery 
amounts to about 25 per cent of the inventory value. A $10 invest- 
ment per acre of crops represents a cost of about $2 . 50 per acre per 
year. 

89. THE IMPORTANCE OF WORKING CAPITAL 

Many a farmer who has apportioned his capital outlays wisely 
enough as between buildings, stock, and machinery, to be used upon 
a given acreage, fails at some critical stage of the year's business 
because of his failure to provide in advance a sufficient fund of what 
the business man calls " working capital." If the exigencies of the 
season demand the replanting of some fields or the hiring of extra 
harvest hands, special spraying to save a crop or special fertilizer to 
stimulate its growth, the fact that all the farmer's capital is already 



CAPITAL-GOODS AS A FACTOR IN PRODUCTION 293 

tied up in the more permanent investments may mean that returns 
upon land, labor, and the capital already employed are much reduced. 
The producer of agricultural products, perhaps even more than the 
manufacturer, needs to foresee the whole cost of carrying his enter- 
prise through to a successful completion. Often the race is lost on 
the home stretch. 

It may be answered that in these later stages of the productive 
process the farmer can borrow such funds as he may need, upon the 
security of his partly finished product. This is, no doubt, very often 
the case. There are, however, at least two situations in which it is 
not true. Even in prosperous communities, it often happens that 
local funds are pretty well exhausted by the end of the planting season 
and summer and fall applicants for loans, no matter how good their 
credit, must be turned away. The other case is that of the less 
prosperous community, in which large numbers of the farmers are 
already using others' capital almost exclusively. The tenant farmer 
of the South, living and operating his farm upon store credit, has 
already pledged his crop — not infrequently for all or more than it will 
ultimately bring. Perhaps $25 used to hire more help at " chopping " 
time or to secure a more rapid picking of the crop in a threatening 
harvest season might return more in proportion than any other part 
of the capital outlay. In the absence of such further investment, 
serious loss results. 

But probably the most striking case at the present time is in con- 
nection with the marketing of the farmer's products. Much of the 
pressure to sell is due to the farmer's inability to wait longer for the 
income from his season's crops. If he could allow his capital to 
remain tied up in the finished product until such time as the market 
should demand his goods for immediate consumption, the higher 
prices which he could then secure would well reward him for his wait- 
ing. But if he cannot defer his consumption, he cannot secure the 
rewards of waiting. 

Our only purpose here is to point out the relatively high 
productivity which such "working capital" frequently possesses. 
Evidently this situation gives rise to two concrete problems, one 
for the farm manager in adjusting size of farm, choice of 
crops, and general organization, and the other that of our rural 
credit institutions. These will be treated in chapters vi and xv, 
respectively. 



294 AGRICULTURAL ECONOMICS 

90. VARYING PRODUCTIVITY OF INDIVIDUAL UNITS IN THE 
SAME CLASS OF CAPITAL -GOODS 1 

By E. DAVENPORT 

Again, no two individuals of the same species can be depended 
upon to give exactly the same quality of milk, for herd records show- 
that the milk of different cows varies naturally from less than 3 per 
cent to more than 6 per cent fat. Nor is this dependent upon the 
food supply, for all authorities agree that the proportion of fat to 
other solids is dependent upon the individual and not upon her 
feed. Moreover, differences nearly as wide as these quoted may be 
found within the limits of a single herd and therefore under identi- 
cal conditions as to feed. Still again, two individuals of the same 
breed will produce radically different amounts of milk or fat, 
whichever is measured, from identical amounts of the same kind 
of feed. 

Three experiments were conducted to determine the limits of this 
difference between cows considered good enough for a place in a com- 
mercial herd. In the first, Eva produced 48 per cent more milk and 
1 1 per cent more butter in ninety-one days than did Janet, and in so 
doing consumed no more grain and but 7 . 6 per cent more roughness. 
These cows were both mature, were fresh on the same day, and 
neither suffered accidents during the experiment, yet Eva produced 
1,057 pounds of milk and 12 pounds of butter fat out of her extra 
feed of 112 pounds of hay and corn stover. The second experiment 
was a comparison between Rose, a native cow nine years old, and 
Nora, a native cow six years old. Rose commenced April 13 and 
Nora May 22, 1899, and both were milked for a full twelve months. 
Both were in good health, and both continued in good flow until the 
last, Rose averaging over 18 pounds of milk per day and Nora nearly 
14 pounds for the last seven days of the test. Each consumed all the 
feed she cared to take, the only restriction being that its composition 
was the same for both. Neither was in any sense beefy, but Rose 
gained 181 pounds and Nora 165 pounds from August 1 to April 1, 
showing that they were evidently working at or near their limit of 
milk production. 

Rose consumed slightly the heavier ration and yielded decidedly 
the larger product in both milk and fat. The accompanying table 

1 Adapted from Principles of Breeding, pp. 78-81. (Copyright by Eugene 
Davenport. Published by Ginn & Co.) 



CAPITAL-GOODS AS A FACTOR IN PRODUCTION 



295 



exhibits the total feed consumed and the product yielded for the 
entire period of twelve months. 



COMPARATIVE MILK PRODUCTION ON BASIS OF FOOD 
CONSUMED 



Cow 


Feed 


Milk 


Fat 


Butter 


Rose 


6,477.92 
6,189.06 


11,329.00 
7,759- 00 


564.82 
298.64 


658.95 
348.41 


Nora 




Difference 


288.86 
4.67 


3,57o.oo 
46.01 


266.18 
89.13 


3IO-54 
89.13 


Percentage 





Cast in verbal form, this means that Rose was able to produce 
47 per cent more milk and 89 per cent more butter than Nora, with 
the consumption of 4.67 per cent more feed. Reducing both to the 
same basis of food consumed, it appears that with a given amount 
of feed for every 100 pounds of milk given by Nora, Rose gave 13Q . 5 
pounds; and for every 100 pounds of butter fat produced by Nora, Rose 
produced 180 . 7 pounds. For purposes of milk production, therefore, 
feed was worth 39 . 5 per cent more when fed to Rose than when fed 
to Nora, and for butter production it was worth 80 per cent more. 
This, then, is the true measure of the functional difference between 
these two cows, and it is good and sufficient ground on which to base 
breeding operations. Further, it is to be noted that this is not the 
difference between a good cow and a poor one but between two good 
cows; for Nora produced 348.4 pounds of butter, which, as Professor 
Fraser remarks, is nearly three times the average yield (130 pounds) 
of cows in the United States, and almost one half more than the 
average yield (250 pounds) of what are considered profitable cows 
in Illinois. 

It may be added at this writing (1906) that Rose, though used in 
many experiments and exhibited at various state fairs and at the 
St. Louis Exposition, is still living, hale and hearty at sixteen years 
of age, and is still an economical producer of milk. She has an 
average yearly record of 384 pounds of butter fat for ten years, and 
though she has been in many tests since the one just reported she has 
never been beaten but once. That was in the following case, which 
bears further on the present point. Three cows were in this test with 
Rose — Tina Clay's Queen, known to be a poor cow, and two natives, 
known as No. 1 and No. 3, supposed to be two of the four best cows 



296 AGRICULTURAL ECONOMICS 

bought for experimental purposes out of a herd of one hundred. 
Reduced to the same feed basis, and taking the yield of Queen as 
ioo, that of No. 3 would be represented by 121, of Rose by 304, and 
of No. 1 by 312. This is a rate of more than three to one against the 
poor cow, or over two and one-half to one between good cows on the same 
feed basis. 

These are not isolated and peculiar cases. Professor Fraser, of 
the University of Illinois, tested 554 cows in 36 commercial dairy 
herds of the state for a full period of twelve months each. He found 
that the best 25 per cent of the whole number tested were able to 
produce an average of 301 pounds of butter fat per year, while the 
25 per cent of lowest efficiency were able to produce an average of 
but 133.5 pounds — a range of considerably more than two to one. 
The practical significance of this difference is pointed out by Professor 
Fraser as follows: If it costs thirty dollars a year to feed the poorer 
cows and thirty-eight dollars a year to feed the better ones, then at 
present prices a herd of twenty-five of the latter will produce as much 
net profit as would a thousand of the former. A little calculation will 
show the immense saving in labor in keeping the smaller herd, and, 
what is equally significant, the relatively smaller investment in 
animals, feed, and barns, and the smaller volume of business generally. 

91. PROTECTING THE FARMER AGAINST INFERIOR CAPITAL- 
GOODS 1 

The People of the State of Michigan enact: 

Section i. The term " commercial fertilizer" shall be held to 
include any and every substance, limestone or lime rock, imported, 
manufactured, prepared, or sold for fertilizing or manurial purposes, 
the retail price of which is ten dollars or more a ton. Every lot or 
parcel of commercial fertilizer sold, offered, or exposed for sale, or dis- 
tributed within this state shall have on each bag or sack, in a conspicu- 
ous place on the outside, a legible and plainly printed statement in 
the English language clearly and truly certifying: 

a) The net weight of the contents of the package, lot, or parcel; 

b) The name, brand, or trade-mark; 

c) The name and principal address of the manufacturer or person 
responsible for placing the commodity on the market; 

1 Public Acts of Michigan: Acts 135 and 227 of session of 1915; 202 and 254 
of the session of 19 13. 



CAPITAL-GOODS AS A FACTOR IN PRODUCTION 297 

d) The minimum percentage of nitrogen in available form; 

e) The minimum percentage of potash, K 2 0, soluble in distilled 
water; 

/) The minimum percentage of available phosphoric acid, P 2 s , 
and also of total phosphoric acid; 

g) And no other statements of chemical compounds except as 
above 

Sec. 2. Before any commercial fertilizer is sold or offered for 
sale, the manufacturer, importer, or party who causes it to be sold 
or offered for sale within this state, shall file with the secretary of the 
State Board of Agriculture a certified copy of the analysis and cer- 
tificate referred to in section one, and shall also deposit with said 
secretary a sealed glass jar containing not less than two pounds of 
such fertilizer, with an affidavit that it is a fair sample of the article 
thus to be sold or offered for sale 

Sec. 7. The State Board of Agriculture by any duly authorized 
agent is hereby authorized to select from any package of commercial 
fertilizer exposed for sale in this state a quantity not exceeding two 
pounds, for a sample, such sample to be used for the purpose of an 
official analysis and for comparison with the certificate iiled with the 
secretary of the State Board of Agriculture and with the certificate 
affixed to the package on sale. 



The People of the State of Michigan enact: 

Section i. The Washburn and Moen gauge is hereby declared 
to be the standard gauge for testing galvanized wire fence within this 
state. 

Sec. 2. The following test as to quality of galvanizing is hereby 
declared to be the standard test of the galvanizing of such fence within 
this state. The wire shall be thoroughly cleansed with a solution of 
soap, using a soft cloth or cotton waste. It shall then be immersed in a 
solution of copper sulphate neutralized with copper oxide and filtered^ 
of a density of 1 . 186 at sixty-five degrees Fahrenheit. It shall be 
kept in this solution at a temperature of from sixty to seventy degrees 
Fahrenheit for one minute, then immersed in clear water and after- 
ward wiped dry. After such immersion and drying, if the wire does 
not show a deposit of copper indicating that some portion of the zinc 
coating is entirely removed, it shall be considered as "one minute 

This test shall be immediately 



298 agricultural economics 

repeated and the wire shall be graded according to the number of 
immersions it may be able to stand without showing a deposit of 
copper, and such grades shall be designated as "one minute," "two 
minute," "three minute," "four minute," etc., wire, in accordance 
with the number of minutes during which such wire respectively stood 
such test without showing a deposit of copper: Provided, however, 
That all tests shall be made on straight sections of stay or line wire 
and not on locks, wraps, or winds of such fence 

Sec. 6. It shall be the duty of the State Board of Agriculture to 
test all samples of all galvanized wire fence submitted to them for 
that purpose and to determine whether such fence is of the standard 
gauge and grades provided in this act. If they shall find such fence 
to be of such standard gauge and grades, they shall issue to the manu- 
facturer or dealer applying therefor a certificate, good for one year 
from the date thereof, permitting such manufacturer or dealer manu- 
facturing or selling such galvanized wire fence, to attach to each and 
every bundle of such fence of the same gauge and grade so tested, a 
tag or label bearing the following statements : 

i. Name and address of manufacturer or dealer; 

2. Date of expiration of certificate; 

3. Date of manufacture of such fence; 

4. Galvanizing test, whether "one minute," "two minute," 
"three minute"; 

5. Gauge of top wire; 

6. Gauge of bottom wire; 

7. Gauge of line wire; 

8. Gauge of stay wire. 

Sec. 7. Any person who shall sell or offer for sale any galvanized 
wire fence tagged or labeled with the tag or label prescribed in section 
six of this act without having the same tested as prescribed in this 
act and without paying the required fee and procuring the certificate 
provided for by this act, or which is found to be of an inferior grade or 
gauge to that specified on such a tag or label, when submitted to the 
test provided for in section eight of this act, shall be guilty of a mis- 
demeanor (punishable by a fine of not less than one hundred dollars 
or imprisonment for a period not exceeding six months, or by both, and 
in addition shall be liable for all damages sustained by the purchaser) . 

Note. — Similar laws provide against the adulteration or mis- 
branding of agricultural seeds, insecticides and fungicides, and com- 



CAPITAL-GOODS AS A FACTOR IN PRODUCTION 299 

mercial feeding stuffs. All such concentrated feeds must be accom- 
panied by "a chemical analysis, stating the percentages it contains 
of crude protein, crude fiber, nitrogen-free extract, and ether extract, 
all constituents to be determined by the methods adopted by the 
association of official agricultural chemists." "The secretary of the 
State Board of Agriculture shall publish in his annual report a correct 
statement of all tests and analyses made, certificates filed in his office, 
and fees received" under these acts. — Editor. 

92. THE COST OF AN IRRATIONAL PURCHASING STANDARD 1 
By J. F. STEWARD 

Geographic differences as to farm requirements for machinery are 
the source of great perplexities to the manufacturer. Oifarm wagons 
alone one manufacturer — not the largest — is required to provide an 
almost incredible number of kinds. If the kinds differed radically, 
matters would be simplified. 

When I tell you of wheels alone 650 varieties are demanded, 500 
running gears, and of bodies as many more, you will feel like doubting 
the fact. Of varieties of tongues and methods of securement there 
are very many more. And further, when you take into account the 
number of combinations that may be demanded of this one manufac- 
turer — over 7,300 — you who are not familiar with the subject may 
think I am romancing. In one region of the country one of the many 
kinds of body will be demanded, with a certain form of hounds or a 
certain form of the many wheels, and so it goes. If this were not the 
case — and it is made to be the case largely by precedent — the manu- 
facture of farm wagons would be a simple matter, and prices would 
be materially lower. And when I say to you that the International 
Harvester Company, in one of its types of machine, puts out no kinds 
of binders, considered as shipment orders, you may think I am more 
than romancing. I do not mean that they differ in principles, but the 
varieties manufacturers are forced into by the demands must each be 
considered as a different machine, because its parts must be assembled, 
boxed, listed, stored, and shipped separately from all others. If I 
were to have my way, I would try to convince the farmer that it 
does not pay him to require that his whims be satisfied. It is in part 
because of his whims that agricultural machinery is so expensive. I 

1 Adapted from Transactions of The America n Society of Agricultural Engineers, 
1908, Vol. II, No. 2, pp. 39-40. 



300 AGRICULTURAL ECONOMICS 

should like to beat it into the heads of those farmers that do not 
already know the fact, that no small part of the price they pay for 
some of their agricultural machinery is due to the necessity, on the 
part of manufacturers, to satisfy whims. It seems to me that our 
agricultural schools can do much to develop level-headed farmers, 
men whose choice, say of a wagon, will be the result of good judgment 
rather than the fact that he believes his father's type of wagon was 
best. A manufacturer cannot sell the same kind of wagon in Colorado 
that is demanded in the eastern states, although the conditions are 
practically the same. In the few good agricultural portions of the 
eastern states the western farm wagon finds no sale. This has been 
proven to the satisfaction of the makers who have fallen down in their 
efforts to produce a type of wagon that will serve a purpose the 
country over, wherever conditions are uniform. They have failed 
because brain conditions are not uniform. This is a matter of catering 
to the likes and dislikes of the buyer rather than supplying demands 
directed by his judgment. 

D. Depreciation of Stock and Equipment 

93. DEPRECIATION OF FARM MACHINERY 1 
By F. W. PECK 

The annual depreciation in farm machinery is usually estimated 
at 10 per cent. The statistics gathered on these farms for the years 
1902 to 1907 showed that the average depreciation of all machines 
was approximately 7.3 per cent. The farm records on practically 
the same farms for the years 1908 to 19 12 indicate a slightly lower 
figure as the average depreciation on all machines. For the latter 
period approximately 6 . 7 per cent is the figure arrived at from the 
records as shown in Table XL This is to be accounted for by the 
fact that these farmers have taken better care of their machinery. 
It has also been found that many of the machines that were purchased 
to. 1902, 1903, and 1904 are in such good condition as to bring the rate 
aearer 6 per cent than 10. The longer such records are kept the more 
clearly is it shown that as machines grow older the rate of depreciation 
becomes less. For instance, a grain binder may seemingly depreciate 

1 Adapted from Bulletin 145, Minnesota Agricultural Experiment Station, 
pp. 24-25. 



CAPITAL-GOODS AS A FACTOR IN PRODUCTION 



301 



at the rate of from 10 to 12 per cent, but it is found that the machine 
will last much longer than eight or ten years. On the farms studied, 
many machines from twelve to sixteen years old are in use and appar- 
ently have considerable usefulness left. 

Table XI shows the annual rates of depreciation of farm machinery 
which have been computed from inventories showing the original 
value, the years in use, and the present value of each machine. This 
takes account of the amount of work done and Repairs during the 
year, present condition, and apparent future usefulness of the 
machine, as well as possible auction or exchange value. The annual 
depreciation in dollars thus obtained, divided by the average 
original investment, gives the annual rate of depreciation in 
percentage form. 

TABLE XI 

Annual Depreciation of Farm Machinery Expressed in Percentages 



Machine 



Northfield 

(Rice 
County) 



Marshall 

(Lyon 
County) 



Halstad 
(Norman 
County) 



1,820-Acre 

Farm 
(Norman 
County) 



640-Acre 

Farm 
(Stevens 
County) 



Average All 
Machines 



Grain binders 

Grain drills, seeders . 

Corn binders 

Corn planters 

Corn cultivators 

Mowers 

Hay tedders 

Hay loaders 

Hay rakes 

Gang plows 

Sulky plows 

Walking plows 

Wagons 

Harrows 

Disks 

Manure spreaders . . 

Hay racks 

Reapers 

Grain tanks 

Sleds 

Fanning mills 

Horse weeders 

Harness (heavy) 

Gas engines , 

Silage cutter 

Separators , 



8.47 



5° 



7-65 



44 



07 



40 



44 



302 AGRICULTURAL ECONOMICS 

94. WASTE OF CAPITAL INVESTED IN FARM MACHINERY 1 
By E. M. D. BRACKER 

Wasteful practices with farm machines occur to a greater or less 
extent on almost every farm. These cause a very large annual loss. 
To prevent this loss the farmer should master the details relative to 
the selection, adjustment, and care of machines. Few farmers, com- 
paratively speaking, have a thorough knowledge of the machines they 
are using. [There then follow thirty- six pages devoted to discussion 
of technical details of material, design, adjustment, and points to be 
borne in mind in selecting a machine suitable to the task to be per- 
formed. — Editor.] 

Many farmers are penny-wise and pound-foolish in their farming 
operations. Great care will be taken to insure maximum yields and 
to gather the harvest so carefully that none of the crop spoils or is 
lost. A farmer exercises great care in these respects because other- 
wise his income might be reduced one or two hundred dollars. Yet 
the same farmer's income may easily be lessened this much or more 
by his neglect properly to care for the machines with which his crops 
were tended. 

It is essential that all machines be protected from the elements 
while not in use, and a building should be provided for this purpose. 
Investigations upon the depreciation of farm machines, made at the 
Minnesota Agricultural College, show for twelve common farm imple- 
ments annual depreciations ranging from 6.75 per cent to 11.78 per 
cent. These figures apply to machines which have been housed. 
Authorities estimate that machines depreciate twice as quickly when 
they are not housed. 

Just to see how the neglect to protect his machines from the 
elements affects the farmer's income we will take a farm which 
requires $600 worth of machinery properly to equip it. The average 
western Oregon farm requires about this outlay in farm machinery. 
If these machines are properly housed they will depreciate approxi- 
mately $48 in value each year, but if they are not carefully housed the 
depreciation may be at least $96 each year and in some cases very- 
much more. It is evident that the money invested in the building 
will yield a dividend which would soon repay the cost of the building. 
After this is paid for, the farmer will find that the dividend is quite 

1 Adapted from Experiment Station Bulletin 133, Oregon Agricultural College, 
pp. 3, 11, 38-41. 



CAPITAL-GOODS AS A FACTOR IN PRODUCTION 303 

a factor in increasing his annual income. In addition to this, if the 
farmer should desire to sell some of his machines at any time he will 
find that they will bring a much higher price if they bear evidences of 
careful housing than they would if they were weather-beaten in 
appearance. 

Likewise, when machines are not properly housed but are exposed 
to the elements during idle seasons, much more time and effort is 
required to get them working properly. This extra time and effort 
is frequently expended during the busiest season, when the farmer's 
time may easily be worth several dollars an hour. It often falls to 
the lot of farmers who are indifferent about housing their machinery, 
to have the trying experience of getting a harvesting machine to do 
even a poor grade of work when the crops are spoiling. No doubt 
there are many costly experiences during the lifetime of such farmers, 
any one of which might pay for the entire cost of building a suitable 
machine shed. 

While it is essential that machines be properly cared for while not 
in use, it is also essential that they be properly cared for while they 
are being used. When a machine is operating in perfect adjustment 
it has a characteristic sound. A careful operator of machines, know- 
ing this sound, is able to detect at once when anything is wrong and 
stops immediately to find the cause of the trouble. It may be that 
the discordant note was caused by a bolt which has become loose. 
If this bolt is tightened at once the machine is again in perfect running 
condition. If, however, the loose bolt is not given immediate atten- 
tion it means, in many cases, the breaking of a part that causes a 
delay of several days. 

It is a splendid plan to go over the machine after the day's opera- 
tions, adjusting bearings and gears for wear where it is possible to 
do so, tightening loose bolts, making sure that the lubricating devices 
have been working properly and that the cutting parts are sharp. 
The machine may be examined at any time most convenient after the 
day's run. If this plan is followed systematically, it will require but 
a few minutes' time each day and will prevent many breakages that, 
because of the delay in waiting for repairs, are far more costly than the 
mere expense of their replacement. A machine kept in constant 
repair will also have a longer life and give more satisfactory service 
than one that is repaired in a haphazard way. 

Note. — "It is a well known fact that more machinery is worn out 
through misuse and neglect than from actual wear. Many farmers 



304 



AGRICULTURAL ECONOMICS 



leave their $125.00 grain harvester standing out in the weather 
instead of building a suitable machine shed, and the plow and harrow 
often receive the same treatment. This condition exists generally 
throughout the Middle West, and Wisconsin farmers are seemingly 
as negligent as those of any other state. Reports from 150 members 
of the Wisconsin Agricultural Experiment Association indicate 207 
machines out of a total of 695 as being housed in suitable sheds. 
From observations made from traveling over the state, the figures 
give a fairly good representation of the care which the average farmer 
gives his farm implements." — Twenty-third Annual Report of the 
Agricultural Experiment Station, University of Wisconsin, p. 285. 



95. DEPRECIATION OF LIVE STOCK 1 
By W. J. SPILLMAN 2 

The data obtained in a survey of 643 farms in Chester County, 
Pennsylvania, make it possible to calculate the rate of depreciation on 
dairy cows, as well as on farm horses. The rate obtained represents 
approximately the average charge which must be made for deprecia- 
tion in determining the cost of maintaining a dairy herd. 

TABLE LV 

Showing Depreciation of Dairy Cows on 378 Farms Operated by Owners, 

Chester County 





Number 


Value per Head 


Total Value 


First inventory 


4,196 
589 
345 


$56.10 
63.84 
63.84 


$235,400.00 


Cows purchased 


37,605.00 


Cows raised 


22,025.00 


Total 






$295,030.00 










4,164 
89S 


$57- 01 
37-36 


$237,430-00 
33,437-oo 


Cows sold and slaughtered * 


Total 






$270,867.00 










Difference 






$ 24,163.00 
3,789.00 


Increase at end of year in value 




$0.91 






Total loss 






$ 27,952.00 
236,415.00 


Average investment 






Rate of depreciation, percentage 






11.82 











1 Adapted from Bulletin 341, Office of the Secretary, United States Department 
of Agriculture, pp. 93-96. 

. fl H. M. Dixon and G. A. Billings, joint authors. 



CAPITAL-GOODS AS A FACTOR IN PRODUCTION 305 

The results of the calculation are somewhat surprising and the 
figures for different regions vary widely. While Chester County shows 
an average annual depreciation in value of 11.82 per cent, a similar 
calculation for an important dairy center in southern Michigan 
showed only 4 . 07 per cent. This remarkable difference is due mainly 
to the difference in prices at which cows are bought and sold in the 
two localities. In the Michigan locality the average price paid for 
cows by dairy farmers was $48 . 48. The average price at which these 
same farmers sold their discarded cows was $42, a difference of only 
$6 . 48. In the Pennsylvania locality the average purchase price was 
$63 . 84 while the average sale price was $37 . 36, a difference of $26 . 48. 
The Pennsylvania farmer thus loses $20 more per cow bought and 
sold than does the Michigan farmer. This accounts for the much 
larger annual charge for depreciation on the Pennsylvania farms. 

The rate of depreciation of farm work horses in these same 
localities was also calculated by methods similar to those used in the 
foregoing table for cattle. In both cases the annual rate is very 
close to 5 per cent, being 5 . 09 in Chester County, Pennsylvania, and 
4.87 for the 300 farm-owners of Lenawee County, Michigan. The 
rate is largely determined by the practice of farmers of disposing of 
horses while they are still salable at a fairly satisfactory price. If all 
farm horses were kept until their usefulness was at an end, the depre- 
ciation on them would undoubtedly be much greater than the results 
here found. The death-rate would also be much greater. On the 
average, the farmers of the Michigan locality keep a horse 8 . 5 years 
and sell him then for $18 . 68 less than they paid for him. The Penn- 
sylvania farmer, on the other hand, keeps his horses an average of 
12. 1 years, and then sells them for $29.34 less than they cost 
originally. 

Note. — Bulletin 2Q5 of the Cornell Experiment Station says 
(p. 494): "The loss from decrease in value of sheep sold is greater 

than the losses from deaths This loss due to selling old sheep, 

together with the deaths of sheep, would give a depreciation and loss 
of 10 per cent as contrasted with 4 per cent for cows. The deaths 
among sheep averaged 39 per thousand, while the deaths among cows 
averaged only 12 per thousand." Professor Warren mentions else- 
where {Farm Management, p. 235) that "hogs grow enough so that 
old ones are worth more than young ones, but the losses from death 

are very heavy On the average, two-year-old horses may be 

expected to live about 12 more years. The average depreciation on 
a large number of horses would, therefore, be a little over S per cent. 



306 AGRICULTURAL ECONOMICS 

Horses usually do little work before they are three years old, and do 
not do full work until about four years old. For work animals, the 
depreciation would, therefore, average about 10 per cent." He points 
out also that the death-rate among pure-bred and highly graded 
cattle is higher than among common stock. Since the average period 
of usefulness is not longer for the former than for the latter class, the 
yearly depreciation is considerably greater. He estimates it at 4 per 
cent for $40 cattle, 10 per cent for those having a value of $100, 12 per 
cent for those worth $200, and 13 per cent for those worth $300. The 
cost of feed and care and the interest charge in these latter cases 
would also be larger, but such stock "usually gives very much higher 
returns." — Editor. 



E. The Accumulation and Conservation of Capital 

96. THE SERVICE OF CAPITAL AND THE MEANS OF 
SECURING IT 1 

By T. N. CARVER 

There is no mystery about credit or capital. Capital consists of 
tools and equipment, though sometimes we speak of it as though it 
were the money necessary to buy the tools and equipment. Capital 
and land are the factors which call for investment by the farmer. 
Thus the large use of capital in farming has come because of the 
invention of agricultural machinery. When farming was done with 
few very simple tools, most of which were made either by the farmer 
himself or by the local blacksmith, capital did not play a large part 
in agriculture. Another way of saying the same thing is that it did not 
take much money to buy all the equipment the farmer needed or 
knew how to use. The purchase of land was the only thing requiring 
much money, and land, in this country, was either free or very cheap. 
Therefore, there was very little money required to start in agriculture. 
At the present time, not only is the price of land rising, but the equip- 
ment of a farm requires more capital because of the increased use of 
improved machinery. This is likely to increase more and more as 
the years go by. 

Capital is brought into existence in only one way — that is, by 
consuming less than is produced. If one has a dollar, one can spend 
it either for an article of consumption, say confectionery, or for an 

1 Adapted from Farmers' Bulletin 593, pp. 1-2. 



CAPITAL-GOODS AS A FACTOR IN PRODUCTION 307 

article of production, say a spade. He who buys a spade becomes a 
capitalist to the amount of a dollar — that is, he becomes an owner of 
tools. The process is precisely the same, whether the amount in 
question is a dollar or a million dollars. If he does not have the dollar, 
his only chance of getting the spade is either to borrow it or borrow 
the money with which to buy it. 

There are only two ways of securing capital for the equipment of 
a farm. One is to accumulate it oneself, by consuming less than one 
produces; the other is to borrow it. The advantage of borrowing is 
that one does not have to wait so long to get possession of the tools 
and equipment. One can get them at once and make them produce 
the means of paying for themselves. Without them, the farmer's 
production might be so low as to make it difficult ever to accumulate 
enough with which to buy them. With their help, he may be able to 
pay for them — that is, to pay off the debt in a shorter time than it 
would take to accumulate the purchase price without them. That is 
the only advantage of credit in any business, but it is a great advantage 
to those who know how to use it. 

There is no magic about credit. It is a powerful agency for good 
in the hands of those who know how to use it. So is a buzz saw. 
They are about equally dangerous in the hands of those who do not 
understand them. Speaking broadly, there are probably almost as 
many farmers in this country who are suffering from too much as 
from too little credit. Many a farmer would be better off today if 
he had never had a chance to borrow money at all, or go into debt for 
the things which he bought. Shortsighted people, who do not realize 
how inexorably the time of payment arrives, who do not know how 
rapidly tools wear out and have to be replaced, or who do not keep 
accounts in order that they may tell exactly where they stand finan- 
cially, will do well to avoid borrowing. Debts have to be paid with 
deadly certainty, and they who do not have the wherewithal when the 
day of reckoning arrives become bankrupt with equal certainty. 
However, that is no reason why those farmers who do know how 
to use credit should not have it. 



97. RURAL THRIFT AND THE CAPITAL FUND 

It is customary to point out in discussions of the capital factor, 
that the ultimate determinant of the size of the capital fund is to be 
found in the degree of thrift which a society possesses. It is then 



308 AGRICULTURAL ECONOMICS 

pointed out that institutional aids to such thrift play an important part. 
Our chapter on consumption has already pointed out that country 
people have generally turned a large part of their net income back 
into the business. Both there and in the present chapter we have 
suggested that in this process of saving they have sometimes done 
not wisely but too well. They have pinched highly necessary 
forms of consumption expenditures in order to make capital out- 
lays of dubious value. Such errors are to be remedied rather by 
better instruction than by more aggressive institutions to promote 
saving. 

However, the problems of thrift and thrift institutions are begin- 
ning to come into greater prominence today in the more prosperous 
agricultural sections of our country. For example, in the rich com- 
munities of the Corn Belt, many farmers are receiving net incomes in 
excess of the needs both of good living for the farm family and of 
adequate maintenance and betterments of the farm. In such regions 
local banks have been growing very rapidly in recent years. They 
have attracted large accumulations of capital, which otherwise would 
very likely have gone for the less pressing consumption wants, such as 
touring cars, or the less productive forms of farm outlay, such as 
stone barns and ornamental fences. 

Such accumulations of capital in county banks are then available 
on a loan basis for the better equipment of the younger or less well- 
to-do farmers of the community. Specifically, country banks have 
been a serviceable means of keeping the capital of the retiring farmer 
still at work in the country, instead of being invested in town lots or 
railway bonds. This is an important service, because the increase in 
the amount of capital needed in modern types of scientific agriculture 
creates a demand for a fund larger than can be accumulated from 
current operations. It is evident that the modern business farmer is 
often in a position to make productive use of capital much larger 
than what he can himself supply. 1 Whether these additional funds 
be the surplus of older or more fully developed farming sections 
or the savings of non-agricultural populations, it is highly desirable 
that a means be found for putting them to work in agriculture. 
This is an important phase of the problem of rural credits (see 
Chapter XIV). 

1 This is the normal situation of the business enterpriser, in whatever line of 
production. 



CAPITAL-GOODS AS A FACTOR IN PRODUCTION 309 

98. THE ROLE OF INSURANCE 

Sudden destruction of capital as the result of fire, wind, and 
hailstorms, or the death of stock has been a frequent source of dis- 
aster to the farmer. Such losses may be looked at from two points 
of view. First, there is the social aspect of the case. If property has 
been actually destroyed, the total equipment of the nation or of the 
industry has been, by so much, curtailed and its efficiency reduced. 
This loss cannot be compensated, though new effort and saving may 
in time accumulate a new stock of goods. Obviously, mere insurance 
settlements do not alter the fact of such loss to society's productive 
plant. 

But there is also the individual aspect of the matter. While 
insurance cannot restore the burned building or the dead animals, 
it can restore their value, in part at least, to their former owner. 
Thereby it enables him to replace his property and continue his 
business. It protects his personal capital by distributing his losses 
over many who have not so suffered. And the logical development 
of the business of insurance is to bring about systematic efforts toward 
the reduction of losses, by the introduction of preventive measures. 
If the farmer is induced to be more careful concerning lanterns in the 
barn or to take greater precautions against thresher fires; if his premises 
are inspected by the veterinarian of the live-stock insurance company, 
diseased animals eliminated, and sources of infection removed, what 
began as an effort to protect the capital position of the individual 
becomes a means of conserving the capital of society as a whole. 1 

1 For a discussion of farmers' mutual insurance companies, consult Powell, 
Co-operation in Agriculture; Valgren, Quarterly Journal of Economics, XXV, 387. 



VI 

ORGANIZATION AND MANAGEMENT OF THE 
AGRICULTURAL ENTERPRISE 

Introduction 

We come now to the very heart of the problem of agricultural 
production. Here we pass from the study of concrete objects to a 
consideration of abstract relationships. We have been talking of 
physically measurable qualities of soil and climate, human beings, live- 
stock, and farming implements. Our task there was somewhat similar 
to that of the chemist when he studies the various elements of which 
our earth is made. Now we pass on to study the behavior of these 
elements when they are brought together under different circum- 
stances, and to ascertain the qualities, good and bad, of the different 
compounds so produced. 

By doing this we hope to learn how to bring together the right 
quantities of the proper ingredients under conditions favorable to 
desired forms of activity. The chemist who knows the valences of 
the elements with which he is dealing and the laws of their behavior 
under different conditions of heat and pressure can teach the manu- 
facturer to avoid waste by using his materials in their proper combin- 
ing proportions, and to secure a desirable and salable product instead 
of the uncertain or inferior product of chance mixtures or unfavorable 
conditions. Dependable and* profitable results can be regularly 
secured only by those who possess knowledge of the properties of the 
materials and forces with which they work, and secure thereby con- 
trol of their operation. 

The same general principle holds good in the case of economic 
organization. Fundamental to our study of the effective organization 
of agricultural enterprise, therefore, is an understanding of the law of 
combining proportions, which is but the broader application of the 
law of diminishing returns, already studied in its particular bearing 
upon the land factor. In selection ioo Professor Carver demonstrates 
that, under given circumstances of agricultural technique and market 
conditions, there will be one most profitable (and many less profitable) 
combinations of labor and capital which might be applied to a given 

310 



ORGANIZATION OF THE AGRICULTURAL ENTERPRISE 311 

parcel of land; there is also an amount of land and of equipment with 
which a given individual can work most profitably; and some par- 
ticular amount of land upon which and of labor with which a given 
piece of capital equipment can secure the greatest return. 

To all this Professor Taylor adds the observation that these com- 
binations of land, labor, and capital likewise take on group properties 
of their own, and that the injudicious combining of these industrial 
composites results in low proportionate return to those which are in 
excess, in a way similar to that displayed in combinations of the 
separate factors. In terms of the farmer's problem this means merely 
that he must answer questions of organization external to his particular 
farm as well as those which are internal to it. He must ask himself 
whether any certain line of farm production be in a stage of diminishing 
returns as compared with other lines, or even whether agriculture as 
a whole shows a smaller proportionate return to land, labor, and 
capital used in it than to equal quantities of these factors directed 
toward trade or manufacturing enterprise. A decade ago many of 
our best young men exercised their entrepreneur function by deserting 
the farm and helping to direct land, labor, and capital to the more 
profitable industrial employments. Today many city boys are turn- 
ing toward the country, and much city capital is being diverted to our 
agricultural lands. Each back-to-the-land-er adds his influence in 
favor of a new organization of our whole economic system. 

As to the choice of farm enterprises, or lines of production, it is 
quite evident that no set rule can be laid down. The agricultural 
scientist, to be sure, can tell us quite definitely what are the technical 
possibilities of a given farm or region, but the determination of eco- 
nomic expediency (which means maximum profitableness) is another, 
and more complicated, matter. In the latter case, costs of production 
under the given conditions of agricultural technique, transportation 
facilities, and market situation are not less important than soil con- 
tent, rainfall, and temperature. The agricultural scientist concerns 
himself with a gross physical product, the agricultural economist with 
a net-value product. A reading of selections 103 and 104 will serve 
to show some of the examinations and comparisons which the farmer 
must make in deciding which enterprises would be most profitable. 

A choice of enterprises having been made, it might seem to be a 
comparatively easy matter to organize the working plant for efficient 
production of this output. Here, however, the fanner is confronted 
by certain difficulties which press upon him more heavily than upon 



312 AGRICULTURAL ECONOMICS 

his brothers in other lines of industry. He is far from being as free 
to enlarge or diminish the size of his labor .force as is the manufac- 
turer, hiring, discharging, and hiring again from an ever-available 
labor supply. Nor can he shut down his plant for three months or 
a year, or curtail or increase his acreage in mid-season to offset weather 
conditions or to meet market developments. Farm projects move 
in cycles of from one to several years. Idle horses must still be fed, 
other stock must be kept up, and satisfactory laborers must be hired 
on a season's contract. 

Likewise, the farmer often finds the size of the units of one or 
more of the productive factors with which he must work fixed by 
forces only partially within his control, and dictated by considerations 
other than those of technical efficiency in his enterprise. For example, 
the 160-acre farm is an institution in this country whose reasons for 
being are to be found in the book of the surveyor, not in the intention 
of the farmer. So, too, the size of the labor force must all too often 
coincide with the numbers of the family group, rather than with the 
labor needs of the enterprise. Commonly the size of the capital factor 
has been predetermined by the amount of wealth accumulated by the 
farmer or inherited from his father, instead of being an amount ascer- 
tained as necessary to maximum efficiency of operation. 

The ideal of farm organization would run something like this: 
Once the enterprise was determined upon, it would be equipped with 
such number and grades of workers, such quantity of land, and such 
capital as would give it its greatest technical efficiency. What we 
find in practice is strongly in contrast with this ideal. The farmer 
has, let us say, 160 acres of ground, and could rent only in 160-acre 
or perhaps 8o-acre tracts, if at all. He has had his own labor and 
such aid as a wife, a son, and two daughters could render him, but 
has had limited opportunities of hiring what other help he needed and 
when he needed it. He had, perhaps, a capital of $5,000 and inade- 
quate facilities for borrowing other funds when they were needed in 
the enterprise. With so large a number of limiting factors, each set 
by circumstances unrelated to the technical requirements of farming 
or to each other, the farmer has stood little chance of bringing his 
organization to its largest profit-making point. 

There are two possible lines of attack upon problems of this sort. 
First, we may attempt to remove the disabilities under which the 
farmer works. Later chapters (on land tenure, labor problems, and 
rural credits) set forth some of the suggestions which have been 



ORGANIZATION OF THE AGRICULTURAL ENTERPRISE 313 

offered for solving these problems. But, even if we succeed in better- 
ing our conditions in these particulars, it is evident that the farmer 
will continue, as long as our world is one of human imperfections, to 
face handicaps of this same general kind. Labor will never become 
entirely mobile, and capitalists can never arrive at the point where 
their judgment is infallible as to the size of loan which should be 
granted particular security of each individual desiring to borrow. 
Even the best of institutions cannot furnish us with all the labor and 
capital that we want; agriculture must expect in the future as in the 
past to find one of its serious problems in economizing its use of 
factors of production which are scarce and therefore costly. 

Section E indicates a group of problems of this general sort, and 
they are similar to those which producers in all other lines must like- 
wise face. To meet them more intelligently, the manufacturer has 
called in various experts, and together they have devised methods of 
efficiency and economy which now pass under the general title 
"scientific management." Suitable buildings and logical arrangement 
of the plant, time studies, the scientific adjustment of machines and 
choice of tools and materials, careful shop organization — these, 
together with special systems of payment designed to stimulate 
effort, are its essential features. 

Obviously not all this system is adaptable to the farmer's use. 
But, on the other hand, its most important elements are. Farming 
is fast losing its slipshod and rule-of-thumb character, and is coming 
to depend upon scientific scrutiny of cause and effect and careful 
measurement of outlay and return. The methods of science enable 
the farmer to compare the cost of fertilizer with the increase in yield 
or improvement in quality of the product. His beets are tested for 
sugar content, milk for butter-fat, and wheat subjected to both 
chemical analysis and actual baking tests. The returns from a given 
use of feed and labor by the hog-raiser are measured in terms of pigs 
that mature early, give a high yield of bacon, hams, and lard, and 
but modest contributions to the fertilizer tank. Modern farm man- 
agement works out as carefully as does modern factory management 
the most efficient construction and arrangement of buildings, use of 
equipment, and schedule of work. Hired help is checked up by milk- 
ing records or other means of gauging their productivity. Compara- 
tive studies are made of the amount of labor done by horses on a 
( given outlay for feed and upkeep, with the cost and performance of 
mules, steam tractors, and gas engines. The farmer of the future 



314 AGRICULTURAL ECONOMICS 

will need to scrutinize his operating costs as closely as does the manu- 
facturer today, if he is to protect his margin of profit between outlay 
and return in the competition which is sure to grow keener with the 
passing of the years. 

Finally comes the question of the form of business association 
under which the industry is carried on. In general economics we 
commonly recognize five types of organization in which producers may 
associate themselves together for the carrying on of their economic 
ventures. These are known as individual enterprise, partnership, 
corporation, co-operation, and government operation — or socialism. 
Each of them possesses certain weaknesses peculiar to itself, and each 
has demonstrated certain strength or fitness which has caused it to 
become established in some department of our economic life. Sec- 
tion F attempts to set forth some significant aspects of the relation- 
ship of the different forms of organization to the business of farming. 
Certainly there is no thought that the family-farm is going to be 
abolished; nor, on the other hand, should there be any thought that 
the farm business is going to be immune to the more complex and more 
efficient types of business organization which have evolved during 
these latter days in industrial pursuits. The real question is whether 
agricultural workers are going to develop a new hybrid form of busi- 
ness association which shall retain the constitutional vigor of the 
individual enterprise and yet add to it those specialized efficiencies 
which characterize the larger productive units which have been 
evolved in modern trade, transportation, and manufacturing enter- 
prises. If we are to understand the true meaning and possibilities 
of co-operation, we must analyze it in terms of ability to organize 
land, labor, and capital effectively for economic production. 
Appraisal of its social or political promise should rest upon this foun- 
dation. It is the purpose of selection 120 at least to define some of 
these underlying issues, 

A. The Meaning of Economic Organization 

99. THE FUNCTION OF THE ORGANIZER 1 
By FRANK A. FETTER 

Every separate thing that enters into the making of goods is 
called an economic agent; as in agriculture, the seeds, plows, fields, 
fences, barns, cattle, and labor; in manufacture, the buildings, 

1 Adapted from Economic Principles, pp. 317, 327-42. (Copyright by the 
Century Co.) 



ORGANIZATION OF THE AGRICULTURAL ENTERPRISE 315 

machines, material, labor, etc. But these numerous agents fall into 
two great groups called factors of production, variously named as 
man and nature, labor and material agents, or humanity and wealth. 
We must bear in mind that they are complementary agents and com- 
plementary factors: labor in a void and wealth without labor would 
be equally useless. 

Man is not content merely to gather what is provided, but inter- 
venes to direct the course of industry. Every act of labor and every 
use of goods calls for some decision and direction. The owner of a 
fund of purchasing power cannot leave it to invest itself. The pri- 
mary function of enterprise is the choice of a business in which to 
invest; the next, and essentially last function, is to provide competent 
management. Even for the solitary worker the choice of the right 
time, kind, place, and method of work is most important. There is 
also a wide range of choice in the distributing and combining of labor, 
agents, and materials. A limited supply of agents can be used to 
secure a variety of goods, more or less desirable. There is a choice 
in ways and methods by which a thing may be done. There are many 
wrong ways, there is but one best way, at any stage of industrial 
progress. While most work is done in customary ways and little 
independent judgment is required, yet in every kind of industry new 
problems constantly arise and call for the exercise of choice as to 
methods. The ability to choose and to do wisely is an element in 
personal skill in every economic activity. This quality in the man 
is managing ability, and the action of directing economic activity is 
business management. 

When various industrial groups are associated, direction becomes 
still more important, and the need grows for high ability to manage 
and direct the great units of industry. In the single group it is an 
internal harmony alone that is needed. The work of a dozen men 
must be so arranged that each is in his fitting place. But as this 
group comes into contact with others, the relationship becomes two- 
fold, and there must be both internal and external harmony. Out- 
look upon business conditions and commercial ability become neces- 
sary. The more complex the economic organization of society, the 
greater the chance of mistake and the more injurious are the mistakes 
to a wide range of interests. Large amounts of wealth and labor can 
be rapidly lost through lack of wise direction of an associated group. 

Ever since the beginning of human society some degree of organi- 
zation of industry has existed. In every community by some method. 
however crude, a practical way has been found of determining who 



316 AGRICULTURAL ECONOMICS 

shall organize and manage the factors of production, and who shall 
work under direction. By the ceaseless working of competition, the 
higher places are taken by those fairly capable of rilling them, those 
less capable of managing industry come under the direction of those 
who on the whole are more capable, and the efficiency of the manage- 
ment of business as a whole is maintained or increased. 

Many a man succeeds admirably in minor tasks of direction, but 
has his limitations, whether due to natural endowment or defects of 
education. A man may have just the qualities fitting him to manage 
a small gang of men whom he can see, know, and direct personally, 
but be unable to succeed where some power of imagination and some 
ability at constructive planning are required. A good departmental 
head may be a poor general manager. 

The highest function of the management, that which properly is 
performed by the chief of the organization, is to form the general 
commercial policy of the enterprise. Every active investment is made 
in some generally predetermined line — it is merchandise, agriculture, 
manufacture, transportation, etc., and more specifically is wholesale 
stationery, general farming, iron making, teaming, etc. From the 
moment the general investment is made the management begins to 
exercise the power delegated by the enterpriser, investing and rein- 
vesting, shaping and reshaping the business in accordance with a con- 
tinuous policy. In a degree varying with the kind and size of the 
business, demand must be anticipated. The trend of changing 
fashion, in engineering as well as in dress, the shifting of demand for 
products, must be foreseen and prepared for not too rashly or too 
cautiously. The process in every kind of undertaking, that of buying 
and selling, as well as that of manufacturing, takes time. Materials 
and labor are to be embarked in directions from which they cannot 
be recalled. The widening or narrowing of the scope of the enterprise 
(as to variety of goods, extent of the market sought, etc.) and the 
enlargement or reduction of the size of the plant are decisions wisely 
made only by a mind with a large business outlook. The larger the 
investment and the more complex and distant the factors, the greater 
is the difference of loss or of gain made by the manager's judgment. 
The man who has the ability to do this exceptionally well in the 
largest business merits the title of a " captain of industry." He is 
not a mere employee of investors, but a prominent personality, whom 
investors follow, eager to assume the financial risk under such leader- 
ship. 



ORGANIZATION OF THE AGRICULTURAL ENTERPRISE 317 

The conduct of any business may be thought of as consisting of 
three parts, or processes: (1) buying, (2) alteration (i.e., recombina- 
tion, elaboration, change in form, place, and time), (3) selling. These 
are continuous until the last sale is made and the whole business is 
ended. Buying and selling make up nearly all of mercantile business, 
alteration being subordinate; whereas alteration is the most striking 
feature of manufacturing, in which buying and selling appear (often 
mistakenly) to be quite unimportant. 

Almost every business today requires from time to time additions 
of capital, temporary or permanent. Frequent use must be made of 
credit. The confidence and support of lenders, whether banks, trust 
companies, individual shareholders, or investors in bonds, must be 
secured by the management. Good judgment of the money market 
often is as vital as judgment of the market for the particular product. 

The large classes of goods which are to be bought are equipment, 
materials, and labor. In the main the prices of these things are deter- 
mined by impersonal forces and can be only slightly modified by a 
particular buyer. This is especially true of many staple goods. The 
manager can but look upon the price of these materials as fixed, and 
seek to combine them as economically as possible into other products. 
But there are many special patterns and qualities which have no true 
market-price. By close attention, good judgment, skilful bargain- 
ing, one man may be able to buy slightly cheaper than his competi- 
tors, and thus have an advantage over them at the outset. When 
he does this, it is usually by searching out a better market in which 
to buy, buying at a better time, and judging better than his com- 
petitors the quality of the goods. 

Not the least important factor to be bought is labor of every 
grade. The more successful business men are not found usually pay- 
ing less than their competitors for the various grades of workers. 
Success is due rather to utilizing the services so as to make them more 
effective. 

The factors bought — equipment, materials, and labor — are to be 
skilfully and economically combined to secure a product worth more 
than it cost. Indeed, the very buying of them in certain quantities 
and of certain qualities implies and requires a decision, more or less 
exact, as to how they will be used. For the performance of this task 
of combining the factors a management must have, somewhere in the 
personnel, adequate technical knowledge of methods, processes, and 
materials, and experience in the art of applying the knowledge. In 






318 AGRICULTURAL ECONOMICS 

small undertakings, the owner-manager must personally embody 
these qualities, but in more complex organizations the chief executive 
may do without all but the broadest knowledge and ability to judge 
of the results of different processes, and to compare different plans. 
The technical knowledge of details must be supplied by numerous 
specialists, working under his direction — engineers, draftsmen, 
pattern-makers, chemists, mechanics, efficiency experts, cost- 
accountants, etc. 

The management must, with whatever aid it can get, choose the 
general processes to be used, the kind of machinery, the order and 
arrangement of it, the kinds of material, etc., and the various technical 
processes, chemical and mechanical, by which these are to be manipu- 
lated. Not less important, the management must choose and direct 
the corps of workers. Workmen must be selected with a due degree 
of skill, but not of a grade of skill, and therefore of wage, higher than 
is needed for the task. In a small business a manager's tact in handling 
men is one of the most important qualities, and, as the organization 
grows, foremen with managing tact must be hired. 

The right proportioning and skilful substitution of the factors is 
a delicate technical task for the management. The enterpriser must 
constantly study the question whether the application of another 
unit of any one factor at the price will, following the principle of pro- 
portionality, add to value of the product as much or more than the 
cost. This calculation is made for every one of the minor factors 
entering into the business, and for the business as a whole. The 
proper proportion varies at different prices, or costs. If wages rise,. 
"it pays" to get machinery; if wages fall, it pays to let some of the 
machinery deteriorate and to do more by hand labor. Likewise there 
is constant substitution of the various materials. The right propor- 
tions change constantly with inventions. A model factory is so pro- 
portioned that the buildings hold the right number of machines, with 
the right amount of space for the workmen, and the right amount of 
power. If there is more of a single factor than the ideal proportion, 
it is an unnecessary cost. 

In the adjustment of processes to changing market conditions, 
many opportunities for business judgment are presented. The agents 
employed in any industry range from the more valuable down to the 
less valuable grades in a more or less regular series. A great mass 
of unused agents lie just below the margin of utilization in every 
industry. Many agents not actually earning an income may do so 
through a change in business conditions. Great quantities of the 



ORGANIZATION OF THE AGRICULTURAL ENTERPRISE 319 

poorer grades of wealth, even of those things that are relatively fixed 
in quantity, lie unused. Great areas on the edge of civilization still 
await the pioneer, the prospector, and the miner. Here is a source 
of wealth and a field for enterprise, to take these unused things or 
things imperfectly used and convert them into effective agents. 

100. DIMINISHING RETURNS FROM EACH OF THE FACTORS 
OF PRODUCTION 1 

By T. N. CARVER 

To say that the farmer knows better than to concentrate all his 
energies on his best land is the same as saying that he knows and acts 
upon one of the fundamental laws of economics, viz., the law of 
diminishing returns, though, like the Bourgeois Gentilhomme who was 
astonished to find that he had been talking prose all his life, our 
farmer might be surprised to learn that he was acting upon an eco- 
nomic law. This law of diminishing returns is simply a part of the 
general observation that the product of any given piece of land does 
not, even under the same conditions of soil and season, bear a constant 
ratio to the amount of labor and capital used in producing it. That is 
to say, the product does not vary in the same proportion as the labor 
and capital, increasing in proportion as they increase, and decreasing 
in proportion as they decrease. This simply means that there are 
several factors in the production of any crop, including labor, capital, 
and land, and that the amount of the crop is not determined by any 
one or any two of these factors, but by all of them combined. Labor 
and capital, being only a part of the factors, cannot alone determine 
the crop. It is well known to practical men that a niggardly applica- 
tion of labor and capital to a piece of land in the cultivation of any 
crop is little better than wasted, because it will produce so little in 
proportion to itself; whereas a more generous application will yield 
a crop not only larger, but larger in proportion to the amount of labor 
and capital employed. Up to this point the land is said to yield 
increasing returns to the labor and capital employed in its cultivation. 
But if the amount of these factors used in cultivating a given piece 
of land is still further increased, a point will eventually be reached 
where the product will no longer increase as fast as these factors are 
increased. Beyond this point the land is said to yield diminish- 
ing returns to the labor and capital employed. Though larger 

1 Adapted from The Distribution of Wealth, pp. 55-77. (Copyright by the 
Macmillan Co.) 



320 AGRICULTURAL ECONOMICS 

applications of labor and capital may continue to produce larger crops, 
the crops will not be so large in proportion to the labor and capital. 

In growing such a specific crop as corn, for example, a single day's 
labor of a man and team with the appropriate tools, if spread over 
a whole ten-acre field, would be thrown away because it would produce 
no crop at all. Five days on the same field might produce something 
of a crop, but it would be. a poor one. Ten days would certainly 
produce more than twice as large a crop as five, and twenty days' 
labor might possibly produce more than twice as much as ten. 
But forty days' labor would hardly produce twice as much as twenty, 
eighty would certainly not produce four times as much, and two 
hundred days' labor would fall far short of producing ten times as 
much. If these assumptions are true of the particular field in ques- 
tion, it could be said to yield increasing returns up to the point 
where twenty days' labor were expended. Beyond that point it 
would be said to yield diminishing returns. 

In discussions of this subject, confusion has sometimes resulted 
from a failure to distinguish the law of diminishing returns from a 
somewhat similar law relating to the comparative economy of large- 
and small-scale production. It is, for example, sometimes stated that 
manufacturing is carried on under the law of increasing returns, 
because a large factory can be run more economically, and turn out 
its products at a lower cost, than can a small one. But this is quite 
different from saying that a large factory can be run more economically 
than a small one on a given piece of land, or that it would not be 
necessary to use more land in connection with a large factory than 
with a small one of the same kind. 

Each business or industrial unit, such as a farm, a store, or a 
factory, is a combination, under one management, of various factors 
of production, which are usually included under the three heads — 
land, labor, and capital. Among the various questions which the 
manager of such a unit has to determine are the two following: 
(i) What is the best proportion in which to combine the various 
factors ? (2) What is the best size for the whole business unit ? The 
law of diminishing returns has to do only with the former of these 
questions. That is to say, it relates to the varying productivity of an 
industrial unit when the factors are combined in varying proportions. 
On the other hand, the law which relates to the comparative economy 
of large- and small-scale production has to do primarily with the size 
of the unit rather than the proportion in which the factors are com- 
bined. 



ORGANIZATION OF THE AGRICULTURAL ENTERPRISE 321 

The difference between these two laws can be expressed in a more 
compact form by means of the following formulae, which are not to 
be understood as in any sense proving the existence of the laws, but 
only as expressing them in convenient form. 





1 

w 

< 




J.1 

.3 a 

O <-> 


I. 


If X 


with 


F will produce 


II. 


then X 


with 


aF will produce 


II. 


and aX 


with 


aY will produce 



/ more than aP (increasing returns) 

\ less than aP (diminishing returns) 

/(Increasing economy of 
morethan^ large . scale production) 

less than ^/(Diminishing economy 
[of large-scale production) 

It is assumed that a is a positive quantity greater than 1. 

In formula II, it will be observed, the proportion in which the 
factors are combineol is not the same as in formula I, land remaining 
the same while labor and capital are increased by a. In formula III, 
however, the proportion is the same as in I, all the factors being 
increased in the same proportion; but the size of the whole combina- 
tion is increased. 

For the present we are concerned only with the law of diminishing 
returns, whose expression is: 

li ft i 

< PJ2 5 £ 

1. If X with Y will produce P, 

2. then X with aY will produce more than P, but less than aP. 

This, as was shown in the earlier part of this chapter, is the con- 
dition which exists wherever men find it to their advantage to extend 
their cultivation to any but their best land. 

Leaving out of account the increasing or decreasing economy of 
large-scale production, we may add the following: 



.75 o- 






< P.2 2 £ 

3. aX with aY will produce aP; since this reproduces the same pro- 
portion between labor and capital on the one hand and land on the other as was 
given in formula 1. Comparing 2 and 3, it is evident that, labor and capital 
remaining fixed, a variation in the land expressed by the ratio aX : A", will produce 
a variation in the product expressed by the ratio aP : a quantity greater than P 
but less than aP. 



322 AGRICULTURAL ECONOMICS 

It appears that the product does not bear a constant ratio either 
to the labor and capital, or to the land. When the amount of land is 
left unchanged and the amount of labor and capital is increased, the 
product does not remain unchanged, nor does it increase as much as 
the labor and capital. And if the amount of labor and capital were 
to remain unchanged while the amount of land were increased, the 
product would neither remain unchanged, nor would it increase so 
much as the land. From the above formula we may therefore derive 
the following: 

si .-Ss^ -3 

< PJ2S £ 

If X with Y will produce P, 

IV. then aX with Y will produce more than P, but less than aP. 

Thus the law of diminishing returns, originally applied to the product 
of a given amount of land under varying applications of labor and 
capital, is capable of being reversed and applied to the product of a 
given amount of labor and capital when applied to varying amounts 
of land. The principle is the same, and the expression similar. in both 
cases. 

But the principle can be still further extended by separating labor 
and capital and representing them as two factors, instead of lumping 
them together, as has been done thus far in the discussion. Indeed, 
there is every reason for so separating them, for labor and capital 
do not belong in the same class. They are no more alike than are 
labor and land, or capital and land. Moreover, if it is true that an 
increase in the amount of labor and capital on the same amount of 
land will not increase the product as much as the labor and capital 
are increased, it is equally true, and for the same reasons, that an 
increase in the amount of labor on a fixed amount of land and capital, 
or an increase in the amount of capital used with a fixed amount of 
land and labor, will not increase the product as much as the variable 
factor in either case is increased. The statement can therefore be 
enlarged by adding the following formulae to those given above: 

1 

Ph 

will produce P, 

will produce more than P, but less than aP, 
with aZ will produce more than P, but less than aP. 



Acres 

lane 

Units 
labc 






V. If X with Y 


with 


Z 


VI. then X with aY 


with 


Z 


VII. and X with Y 


with 


aZ 



k ORGANIZATION OF THE AGRICULTURAL ENTERPRISE 323 

Formula VI is an expression of the conditions which exist when 
an establishment, comprising a given amount of land and capital, is 
operated by varying amounts of labor. If the plant is undermanned, 
the product may be very small in proportion to the labor employed, 
whereas a larger amount of labor, being able to run the plant effi- 
ciently, might produce a more than proportionally increased product. 
But a point is soon reached at which the plant yields its maximum per 
unit of labor. This is where every laborer is most actively employed, 
with the largest amount of machinery at his disposal which he is 
capable of handling. But the purpose of the management of such an 
establishment is not to get the largest product per unit of labor, but 
the largest product in proportion to the total cost of operation. This 
purpose is not fulfilled by merely working the plant at that rate which 
will yield the largest returns in proportion to the labor, unless the 
cost of labor is the only item of expense in the running of the estab- 
lishment. 

We must conclude, therefore, that if land were free and labor 
expensive, it would be most profitable to combine them in that pro- 
portion which would yield the largest product per unit of labor which 
would require an extensive system of farming. On the other hand, 
if labor were free and land expensive, the most profitable combination 
would be the one which would yield the largest product per unit of 
land which would require very intensive farming. Where both land 
and labor are expensive, the most profitable proportion must lie some- 
where between these two extremes, depending upon the relative 
expensiveness of the two factors. That is to say, where land is dear 
and labor cheap, the tendency is toward intensive cultivation; but 
where labor is dear and land cheap, the tendency is, for equally good 
reasons, toward extensive cultivation. In the real world, where labor 
is always more or less expensive, land is never profitably cultivated 
up to that point which will force it to yield its maximum product per 
acre, and only in extremely new countries, where land is free, is it ever 
profitable to cultivate it so extensively as to yield the maximum per 
unit of labor. 

Since so much labor is never profitably used in connection with 
a given amount of land as to produce the maximum per acre, it follows 
that, in any normal case, an increase in the amount of labor on such 
given amount of land will always increase the gross product. But 
since so little labor is never profitably used in connection with a given 
amount of land as to produce the maximum per unit of labor, it follows 



324 AGRICULTURAL ECONOMICS 

that an increase in the amount of labor on a given amount of land will 
never, in any normal case, increase the product as much as the labor 
is increased. That is to say, except on the frontier it always pays 
to cultivate land beyond the point where diminishing returns begin, 
if it pays to cultivate it at all, but it never pays to cultivate it up to 
the point where an increase in the labor would yield no increase in the 
gross product. Similarly, since so much land is never profitably used 
in connection with a given amount of labor as to produce the maximum 
per unit of labor, it follows that, in any normal case, an increase in the 
amount of land with such given amount of labor will always increase 
the gross product. But since so little land is never profitably used in 
connection with a given amount of labor as to produce the maximum 
per unit of land, it follows that, in any normal case, an increase in the 
land with such given amount of labor will not increase the product as 
much as the land is increased. This is merely a reversed application 
of the law of diminishing returns as originally expounded, and it is 
a necessary corollary of that law. It is, moreover, the condition 
expressed by formula IV. 

Formula VII is an expression of the law which governs any estab- 
lishment or business unit which combines a fixed amount of land and 
labor with varying amounts of capital. By a change of terms, the 
explanation which was given of formula VI can be adapted to this 
one, since the same law applies to this as to other variations in the 
proportion in which the factors are combined. That is to say, an 
increase in the amount of capital used in any typical establishment 
(land and labor remaining the same) will increase the total product, 
but not as much as the capital is increased. On the other hand, 
allowing the capital to remain the same, an increase in the labor and 
the land will also increase the total product, but not as much as the 
labor and land are increased. 

We are therefore driven to the conclusion that there is one law 
which governs the results of every variation of the proportion in which 
the productive factors are combined, no matter which factor is varied. 
It never pays to combine so little of any one factor with so much of 
the others as to get the largest possible product in proportion to the 
one, unless the others are absolutely free and do not need to be econo- 
mized, in which case they pass over into the class of non-economic 
factors, like air and sunlight. This is equivalent to saying that, 
where each factor costs something, it always pays to combine them 
in such proportions that if any one or two of them were increased it 



J 



ORGANIZATION OF THE AGRICULTURAL ENTERPRISE 325 

would increase the product, but not so much as the variable factor, 
or factors, were increased. In every normal case, therefore, where 
the factors are wisely combined, a law of diminishing returns operates 
with respect to each of the factors, and not with respect to one alone. 

101. THE INDUSTRIAL LAW OF DIMINISHING RETURNS 1 
By F. M. TAYLOR 

One of the most important applications of the general theory of 
combining proportions and product respects the capacity of any par- 
ticular quantity of any factor, say land, to increase its output, with 
the aid of an increasing quantum of auxiliary factors, in response to 
an increasing demand. We are trying to get more product out of a 
given farm ; what success do we have ? Now, this problem is impor- 
tant in itself, particularly to the owner of the farm. But there is 
another problem, depending largely for its solution on the solution 
of this first problem, which is of much greater importance to people 
generally as distinguished from the owner of a particular farm. This 
second and more important problem asks, not, What success shall we 
have if we try to get more product from a particular piece of ground ? 
but rather, What success shall we have if we try to get a larger product 
from some particular industry — say wheat raising — taken as a whole ? 

Taking up, now, the matter of possibilities for industries as wholes, 
and assuming general conditions to remain constant, we surely have 
results which, in form at least, are analogous to those already reached 
in our study of individual factors. Any industry, taken as a whole, 
if we were to try to get from it all quantities of output from a very 
small amount up, would be found at some time or other in each of the 
following conditions or stages: (1) output increasable at increasing 
rate or diminishing cost, (2) output increasable at constant rate or 
constant cost, (3) output increasable at diminishing rate or increasing 
cost, (4) maximum output or maximum cost, and (5) output actually 
diminishing. This last, of course, would never be realized, just as in 
our former case, because it would be foolish to expend effort in 
diminishing rather than increasing product. The fourth stage would 
be merely a point as in our preceding case, since there could be but 
one maximum output. The second stage, however, would not as in 
our original case be a mere turning-point from increasing to diminish- 
ing returns. Conditions would be constantly occurring under which 

1 Adapted from Principles of Economics, pp. 118-22. (Copyright by F. M. 
Taylor, 19 11.) x 



326 AGRICULTURAL ECONOMICS 



the quantity producible without any material change in cost would 
be so considerable that, during periods sufficiently long to make the 
matter of much practical importance, we should be getting the 
necessary increases in output with only a proportional increase in 
expenditure. 

The above paragraph has dogmatically asserted for every industry 
the existence of three different stages in which it might be found under 
a perfectly rational procedure. Let us take a moment to confirm this 
statement. In respect to the first stage, diminishing cost, we should 
expect its existence for two or three reasons. First, the moment we 
come to deal with industries as wholes we strike the matter of possible 
increase in specialization. Thus, if the amount of product which we 
must get from an industry is large enough, we can carry very far geo- 
graphical specialization — raising potatoes or apples or watermelons 
from the lands pre-eminently adapted for raising them; and this, of 
course, means more than proportionally increased returns for our 
expenditure and, therefore, diminishing costs. A second reason for 
this result is to be found in the fact that calling on a given industry 
for an enlarged output means that increasing resort may be had to 
large-scale methods. We can make more use of machinery, can have 
greater specialization within each plant, and so on. All this means 
diminishing costs. 

But again, it surely cannot be questioned that every industry 
would sooner or later get into the diminishing returns or increasing 
cost stage. One fundamental factor of industry, land, is absolutely 
limited in amount. Every single piece of it is surely subject to the 
instrumental law of diminishing returns, and so, of course, the total 
is subject to that same law. It follows that, even if all the land were 
equally good for the purposes of a given industry and we could afford 
to put all of it to the service of that industry, there would surely come 
a time when increased expenditure was not followed by proportionally 
increased reward — when increase in product meant more than pro- 
portional increase in cost. But we hardly need say that not all lands 
are equally good for the uses of any particular industry. Whether 
because of location or of qualities which could be altered only at an 
impossible expenditure, they differ greatly in fitness for a given pur- 
pose. In consequence land as such comes under the dominion of the 
law of diminishing returns (returns increasable at diminishing rate) 
much sooner than it would under the former hypothesis. 

But, it may be asked, would not the considerations adduced above 
to show that we may have a condition of increasing returns prove that 



ORGANIZATION OF THE AGRICULTURAL ENTERPRISE 327 

we might go on indefinitely without ever reaching the state of dimin- 
ishing returns? May not the advantages derivable from greater 
specialization or from an increased resort to large-scale methods for- 
ever save us from falling into that dread condition? The answer 
must surely be a negative one. There certainly is a limit to the 
advantages derivable from specialization and large-scale production. 
Every industry whatsoever, if called upon to increase its output 
indefinitely, would ultimately pass into a stage of diminishing effi- 
ciency or increasing cost. 

But, not only would every industry, under the conditions of our 
experiment, inevitably be at some time or other in the condition of 
diminishing cost and at another in that of increasing cost, in many 
cases, anyhow, it would at some time or other be in the condition of 
substantially constant cost. This merely means that the transition 
from the condition of diminishing cost to that of increasing cost is not 
a mere point, but may extend over a considerable change in the volume 
of output. When we remember that, in this case of industries as 
wholes, we are at liberty to increase all the factors so long as more of 
the stock of each is available, the possibility of such a condition of 
constant cost seems plain enough. Land, of course, is the factor 
which is most likely to fail us. Yet it surely must be admitted that 
there are many pieces of ground of substantially the same grade of 
efficiency, counting location, fertility, etc.; and, until all of the best 
grade had been put to use, the particular industry involved would be 
getting out its product at unchanging cost — supposing no change in 
technical conditions. iBut the case is still clearer with industries 
which do not need so large a proportion of land. Just because of this 
fact, the number of sites which are of substantially equal efficiency for 
the industry in question is in excess of the need, and so production 
can expand without being checked by the scarcity of the only factor 
which is strictly limited. 

We have argued that any industry, taken as a whole, may be in 
any one of the three stages as respects the relation of cost to increasing 
output. It should be added that these stages may alternate with one 
another in any order. An industry may be at one time in the con- 
dition of constant cost, then in that of diminishing cost, then in that 
of constant cost again, then in that of diminishing cost, and so on. 
More particularly, for every change there will be a period of constant 
cost. If the enlarged demand for copper causes marginal cost to rise 
to 20 cents, and if, at this marginal cost, output can be expanded, lot 
us suppose, to any figure between 700 million pounds and 900 million; 



328 AGRICULTURAL ECONOMICS 

then, for a period during which demand ranges no more widely than 
this, copper would be a constant-cost good. 

We have seen that any industry may be in any one of three con- 
ditions: diminishing cost, constant cost, or increasing cost. But we 
should naturally expect, and experience confirms the expectation, that 
some industries would be preponderantly in the first stage, others in 
the second, still others in the third. Thus, it is the accepted opinion 
among authorities on railway transportation that this industry is 
preponderantly in the condition of diminishing cost or increasing 
returns. Again, there can be no doubt that a large number of common 
manufacturing industries are most of the time in a condition of con- 
stant cost. Finally, the so-called extractive industries, looked at in 
the long run, anyhow, are commonly viewed as in the condition of 
increasing cost: if we insist on using considerably larger quantities of 
copper, silver, cotton, wheat, etc., we shall have to consent to incur 
a higher cost in acquiring them. 

B. Choice of Location and Enterprise 

102. SPECIALIZATION AND EFFICIENCY 1 
By M. B. WAITE 

Fruit growing in early days in this country was largely incidental 
to general farming. Orchards were planted by farmers whose main 
business was the growing of grains and cereals, live stock, poultry, etc. 
In recent years the business of fruit growing has gradually become a 
specialty. The work has been taken up by fruit men who are special- 
ists in this line and who devote their entire energy to the growing of 
fruits. Among fruit growers there are specialists who grow only one 
sort or one type of fruit, as, for instance, peaches, pears, apples, 
grapes, small fruits, etc. The reason for this is largely the demands 
of intensive methods. Intensive fruit growing requires that every- 
thing shall be done for the tree or vine that it will pay to do. The 
object of the intensive fruit grower is to grow the greatest amount of 
salable commercial fruit per acre, of the best quality which can be 
grown with profit. To accomplish this result pruning, spraying, and 
cultivating must be carefully studied and practiced and the fruit after 
it is grown must be properly picked and packed and marketed to the 
best advantage. The successful fruit grower must be ready to utilize 
at all times the results of scientific investigations in agriculture. 

1 Adapted from Yearbook of the Department of Agriculture, 1904, pp. 169-70. 



ORGANIZATION OF THE AGRICULTURAL ENTERPRISE 329 

The successful fruit grower, in the first place, must be a good 
general farmer; he must understand all about teams, the use of tools, 
plows, and harrows, and the methods of preparing land, seeding, and 
cultivating. He should have some knowledge of chemistry, so as to 
know how to buy and mix his fertilizers and study the chemical needs 
of his crops. Knowledge of plant pathology and physiology is 
essential, and he must keep fully abreast with the latest methods of 
defending his plants against disease. He must also be enough of an 
entomologist to know every bug or insect which commonly attacks his 
crops. He should know fruits and fruit trees thoroughly, at least all 
the species which he grows; he must be familiar with the merits and 
defects of old varieties and be quick to discover the value of new ones. 
He must read everything published about his favorite fruit, and be 
prepared to sift the useful information from that which is not appli- 
cable to his local conditions. He must also be a good business man, 
in order to buy his supplies to the best advantage and market his 
crops with profit. 

103. THE ECONOMIC CONSIDERATIONS IN CROP SELECTION 1 
By H. C. TAYLOR 

What are some of the economic forces and conditions which have 
to be taken into account in addition to the physical and biological 
factors in determining what to produce in a given locality ? 

Opportunity for marketing the product suggests itself at once as 
an important item to be considered. The abundance or scarcity of 
labor, and the abundance or scarcity of capital, in a given locality, in 
comparison with other localities where the s :>il and climate are equally 
good, become important determining factors. Again, of two localities 
with soil and climate equally well suited to the production of a given 
crop, one locality may be suited also to another crop which requires 
the attention of the farmer at the same time of year and which is a 
more profitable crop. 

To illustrate the way in which economic forces need be taken into 
account in determining which crops to grow, take, for example, the 
beet sugar industry. Sugar being desired, man has put forth efforts to 
secure a supply. The problems of securing this supply brought into 
requisition such plants as by nature contain sugar. Among other 
plants a variety of beet was found to contain sugar. The news went 

1 Adapted from Research Bulletin 16, University of Wisconsin Agricultural 
Experiment Station, pp. 93-97. 



330 AGRICULTURAL ECONOMICS 

forth that the sugar supply could be secured from the beet. Every 
intelligent farmer asked himself the question, "Why should I not 
produce sugar beets?" 

The physical and biological sciences were at once brought to bear 
upon this problem to ascertain the soil and climatic conditions which 
are best suited to the growth of the sugar beet. Geology, mete- 
orology, physics, chemistry, entomology, plant physiology, plant 
breeding, bacteriology, etc., made their contribution to the farmer's 
knowledge of the regions in which beets thrive, the varieties of beets 
containing the highest percentage of sugar, the methods of cultivation 
which will best adjust the soil to plant growth, the methods of pro- 
tecting the plant from vegetable and animal parasites, etc. Tables 
were published showing the percentage of sugar found in the beets 
from different seeds on the same soil, and from the same kinds of seeds 
on different soils and under different climatic conditions. Maps were 
made showing the regions where the climate was suitable for sugar 
beet culture. Soils were surveyed with a view to finding the land 
best suited to the sugar beet. 

With this knowledge, which appeared all-sufficient to the minds 
of many experiment station men, beet culture was advocated without 
asking the question, "Where is the beet sugar industry likely to prove 
profitable?" 

The profitable introduction of the sugar beet in any given locality 
where soil and climate are suitable depends upon the relative profit- 
ableness of this crop when compared with other crops occupying the 
same place in the rotation and requiring the attention of the farmer 
at the same time of year. For example, in the sugar beet regions of 
Germany, Indian corn does not thrive, and in the absence of competing 
crops which are very profitable, beets stand a better chance (other 
things being the same) than in the corn belt of the United States, 
where corn is a very profitable competitor of beets. In those parts of 
Germany where the beet sugar industry prospers, beets have only to 
prove as profitable as potatoes, root crops grown for fodder, or a bare 
fallow, in order to find a profitable place in the field system, whereas 
in the corn belt of the United States beets must prove as profitable as 
corn or give place to it. 

The relative profitableness of corn and sugar beets can be ascer- 
tained by a system of records which will show all the elements of costs 
and receipts of the two crops and their influence upon the profitable- 
ness of the other enterprises of the farm. In the consideration of the 



ORGANIZATION OF THE AGRICULTURAL ENTERPRISE 331 

relative profitableness of corn and beets, account must be taken of the 
difference in the acreage of each crop a farmer can manage. It is well 
known that a farmer can grow more acres of corn than of beets. It 
is a mistake therefore to compare profits per acre and to stop there. 
Profit per acre must be multiplied by the number of acres the farmer 
can handle. Furthermore, the way in which the corn or the beets 
complement the other crops with respect to utilization of labor and 
equipment should be considered. It is always desirable to have an 
even and continuous demand for man and horse labor. It is also 
important to consider the profitableness of the other enterprises, such 
as dairying, cattle feeding, or hog feeding, which may be based upon 
the corn crop. 

Some crops can be grown over a wide area. Others are more 
limited in area because of climatic and soil conditions. Where the 
areas of two crops that hold the same place in a rotation and require 
labor at the same time of year overlap, the crop with the more limited 
area will be the strongest competitor for the use of the land especially 
suited to its production. And the tendency is for the crop with the 
wider area to be grown on land not required for the crop with the 
limited area. 

This point can be made clear by reference to a concrete example. 
A piece of land in France, said to be as fine land as exists in the world 
for wheat production, is suited also to the production of grapes that 
make a brand of wine very highly prized. The areas suited to the 
production of this brand of wine are very limited, but the areas suited 
to wheat production are abundant. To exclude wheat from the wine 
land affects the supply of wheat but little, but to exclude the vine 
from any appreciable portion of the limited area suited to its culture 
for the manufacture of this special brand of wine would materially 
reduce the supply and result in a rising price, which would give the 
vine a greater power in competing for the use of the land. 

It happens that, while corn has more extended uses and more 
exclusive uses than sugar beets, the world has a much greater area 
physically suited to beet culture than to corn culture. It is hardly 
probable, therefore, that the sugar beet will ever be able to compete 
with corn on even terms in the corn belt of the United States. 

Wages and interest vary directly with the opportunity for the 
profitable employment of labor and capital and inversely with the 
supply of these factors. This is another economic law which has 
received too little attention in the promotion of the sugar boot industry 



332 AGRICULTURAL ECONOMICS 

in the United States, where opportunities for productive labor are 
abundant and labor and capital scarce in comparison with our Euro- 
pean competitors. 

Other conditions being equally favorable, a country in which 
laborers and equipments are relatively scarce cannot successfully com- 
pete in the production of crops requiring relatively large applications 
of labor and capital, unless the product be a perishable one which will 
not stand long shipments, or one with a very low specific value on 
which the freight would be very high per dollar's worth of product. 
High wages put the sugar beet industry at a disadvantage in the 
United States and this fact points to the wisdom of our producing the 
other crops which require less labor than beets or in the growing of 
which European labor is not generally in competition. 

While the beet sugar industry lends itself well to illustrating the 
necessity of studying economic forces as well as the physical and 
biological forces with which the farmer has to deal in order that a 
practical conclusion may be drawn, this necessity exists in every line of 
production. Tobacco, alfalfa, wheat, barley, oats, corn, cotton, 
potatoes, beans, grapes, apples, peaches, oranges, lemons, dairy 
products, beef, pork, mutton, wool, and all other agricultural products 
have to be produced where the physical environment is suitable, but 
within these limits conditions with respect to labor, capital, markets, 
relative profitableness of competing crops or live stock become prime 
factors in determining what to produce in a given place. Silk and tea 
can be produced in the United States, but on account of the difference 
in labor conditions here and in the competing countries of the Orient, 
these products can be imported more cheaply than they can be pro- 
duced at home. 

104. DETERMINING THE ADAPTABILITY OF ENTERPRISES 1 
By W. J. SPILLMAN 

One of the most important factors in determining profit in farming 
is the adaptability of enterprises to soil and climatic conditions, and 
especially to existing economic conditions. Adaptability to soil and 
climatic conditions is so obvious as to need only mention here, but 
the facts regarding adaptability to economic conditions are not so 
well understood. 

The accompanying table gives an estimate of the average labor 
income for one of the leading dairy counties in the state of Wisconsin 

1 Adapted from Yearbook of the Department of Agriculture, 1913, pp. 101-5. 



ORGANIZATION OF THE AGRICULTURAL ENTERPRISE 333 

and one of the leading dairy counties in the state of Massachusetts. 
The calculations are based on census figures in so far as these are 
available. Unfortunately, certain items necessary to our purpose 
are missing. But the value of the figures as a comparison between 
different regions is not destroyed, for the same defects inhere in the 
estimates for the two regions. 

ESTIMATE OF THE AVERAGE LABOR INCOMES FOR FARMS IN A 

LEADING DAIRY COUNTY IN WISCONSIN AND ONE 

IN MASSACHUSETTS 



Items of Comparison 



Selected County in 



Wisconsin Massachusetts 



Number of farms 

Improved land per farm, acres . 
Number of cows per farm. . . . 
Improved land per cow, acres . , 



Total farm investment 

Value of farm buildings 

Value of implements and machinery . 
Dairy products, per cow 



VALUE OP PRODUCTS 

Dairy products (exclusive of home-used milk and 

cream) 

Wool and mohair 

Poultry products 

Domestic animals sold 

Domestic animals slaughtered 

Value of crops not fed 



Total. 



Labor .... 
Fertilizers . 
Feed 



EXPENSES 



Maintenance of buildings, 4 . 5 per cent 

Maintenance of implements, etc., 20 per cent. 
Taxes, o . 6 per cent 



Total (designated expenses) . 
Miscellaneous expenses 



Total (all expenses) , 



Farm income* 

Interest on investment, 5 per cent . 
Labor income* 



3,356 
65.0 
12.7 
5-38 



$505 

1 

124 

3i8 

42 

576 



$1,566 



$146 

1 

44 
102 

74 
62 



$429 
64 



$493 



$1,073 

575 
558 



5,436 
34-2 
5.02 
4.80 



$10,300 


$7,945 


2,279 


3,282 


368 


405 


42 


106 



$532 

o 

183 

175 

20 

885 



$1,795 



$527 

74 

396 

148 

81 

48 



$1,274 
191 



$1,465 



$330 

397 

-07 



♦Should be increased by the value of home-used milk and cream and receipts from outside 
sources. Should be decreased by the amount paid for live stock purchased. 



334 AGRICULTURAL ECONOMICS 

It is seen that in the Wisconsin county the average labor income, 
as above determined, is $558 per annum and the average farm income 
is $1,073 P er annum. In the Massachusetts county the average labor 
income is minus $67. In other words, the average farm income is 
$67 less than 5 per cent interest on the average investment per farm. 
The reasons for this difference are seen in the data given in the table. 
In the first place, the western farms are twice as large as the eastern 
farms, but the average investment in farm buildings is nearly 50 per 
cent larger on the eastern farms. The investment in farm machinery 
is also considerably larger on the small farms of the East. In the 
matter of gross income the eastern farms have distinctly the advan- 
tage. Although the average number of cows per farm in the Massa- 
chusetts county is less than half of what it is in the Wisconsin county 
and the income per cow is 2 J times as much, the great difference in 
expenses in the two counties more than counterbalances this increased 
income. The Massachusetts county has on the average a higher 
income per farm from dairy products. It also has a 50 per cent 
greater income from crops. The trouble lies in the higher expense of 
farming in the East. The labor bill on the Massachusetts farm is 
$527 annually, while on the Wisconsin farm it is only $146. The 
Massachusetts farmer's children have gone to the city and he must 
hire his labor; the Wisconsin farmer's family does most of the labor. 
The farmer in the Massachusetts county spends an average of $74 a 
year for fertilizers, the one in Wisconsin about $1 annually. The 
Massachusetts farmer buys practically all his concentrated feed and 
perhaps some roughage; the Wisconsin farmer raises most of the feed 
on his own farm, his farm being large enough to justify this course. 
The total expenses of the average farm in the Massachusetts county 
are nearly a thousand dollars greater than in the Wisconsin county, 
while the total income is only about $200 greater. 

In order that farming in this Massachusetts county shall be as 
profitable as in the Wisconsin county, it is necessary, on account of 
the very much higher expense of farming in the East as compared with 
the West, that the farm business be based largely on enterprises which 
have a distinct economic advantage over similar enterprises in the 
West. It is not yet possible to state in full just what these enterprises 
are, but some illustrations can be given. The production of hay in the 
New England states is less than sufficient to supply the local demand. 
A considerable proportion of the supply must, therefore, come from 
the Middle West. As hay is a cheap, bulky product, transportation 



ORGANIZATION OF THE AGRICULTURAL ENTERPRISE 335 

charges on this commodity are relatively high. This gives the eastern 
farmer a much higher price than his western competitor. Hay pro- 
duction, therefore, appears to be one of the enterprises which possess 
marked economic advantages in New England. The production of 
vegetables is another enterprise which enjoys marked economic advan- 
tages when conducted in the immediate vicinity of the consumer. 
This, then, also appears to be an enterprise which should be developed 
in New England to as full an extent as economic conditions justify. 

Those who are most familiar with conditions of production and 
marketing in New England are of the opinion that the larger cities 
of that section are supplied with home-grown vegetable products dur- 
ing the summer months in a quantity approximately equal to the 
demand, but there are many smaller towns and cities, as well as con- 
siderable areas of farming community, in which this supply is inade- 
quate. There is room, therefore, for considerable extension of 
vegetable farming through a large part of this territory. 

It is undoubtedly true that if the system of distribution of perish- 
able farm products were so perfected as to render it possible to supply 
all communities at all times of the year with perishable farm products 
in such quantity as they would use, there would be a very considerable 
increase in the consumption of this class of farm produce. In view of 
the competition with the Middle West, where the production of 
ordinary farm crops and live stock is much less expensive than in 
New England, such organization for the distribution of perishable 
farm produce is of prime importance in this region as a means of 
increasing the possibilities of production of a class of products to which 
the region is eminently adapted and for which it possesses important 
economic advantages in nearness to the consumer and in the fresh 
condition in which products of this class could be laid before the 
consumer. 

Fruit growing appears to be another industry which might well be 
developed to much larger proportions in New England. Not all of 
the region is adapted to this industry, but there are localities here and 
there which can produce various kinds of fruits to advantage. On 
account of the nearness to market and the considerable expense of 
shipping fruit long distances, the New England producer, having an 
unlimited market near at hand, ought to be able to make a profit from 
this industry. 

In the case of dairy products, prices are based quite generally on 
the butter value of milk. Because butter can be shipped at very 






336 AGRICULTURAL ECONOMICS 

small cost from the Middle West to eastern cities, the prices of dairy 
products in the East and West are not greatly different; but the cost 
of production, as we have seen, differs very materially. If the dairy 
industry is to survive in New England it is therefore necessary that 
it should be confined to those phases of dairying in which the price 
of the product is not necessarily based on the butter value of the 
milk. Not only that, but dealers and the public generally must 
recognize the necessity for paying higher prices for milk in eastern 
cities. The fact that dairy cows give some occupation during the 
long winter season in New England is a mitigating circumstance and 
is one of the reasons why dairying persists under such disadvantageous 
conditions. Even if the farmer does not earn ordinary wages for the 
work he does in his dairy in the winter, it is frequently the case that 
the time thus employed would otherwise be largely wasted, so that 
any profit he makes over the actual expenditures in conducting this 
business is so much added to the annual income. The fact remains, 
however, that economic conditions in New England are unfavorable 
to the dairy industry. Many other illustrations could be given of 
economic advantages enjoyed by certain enterprises in particular 
localities, but this is sufficient to show the importance of the subject. 



C. Economical Combinations of the Factors 

105. HOW MUCH LAND ? J 
By M. B. WATTE 

The usual aim of the fruit grower as well as the farmer is to pro- 
duce large quantities of salable produce with the least amount of 
labor and invested capital. In many cases, especially in opening up 
new countries, extensive methods were probably the most profitable 
at the outset. In extensive farming, nature is depended on to do the 
greater part; man does comparatively little. In intensive methods, 
the opposite is attempted; nature is assisted in every possible way 
and encouraged to do her utmost, the aim being the production of the 
largest quantities and of the finest quality per acre. As year after 
year the country becomes more thickly settled, land becomes scarcer 
and more valuable, and intensive methods must gain prominence. 
Even now we hear certain individuals criticized for attempting to 
farm too much land — more than they can handle profitably. 

1 Adapted from Yearbook of the Department of Agriculture, 1904, pp. 172-73. 



ORGANIZATION OF THE AGRICULTURAL ENTERPRISE 337 

There is a good lesson in the story of the Pennsylvania farmer with 
a 400-acre farm who, after selling off 100 acres, found, by giving a 
little better attention to the remaining 300 acres, that his sales were 
in no wise diminished; later, after selling off 200 acres more, and con- 
centrating all his energies on his remaining 100-acre farm, he made it 
produce as much as did the original 400 acres. The writer knows of 
a number of instances where 100-acre farms devoted to fruit culture 
far exceed in production other fruit farms of 400 acres advantageously 
situated. Under such intensive methods, the original fertility of the 
soil is not so important a factor as are convenient markets, adaptability 
to special crops, and other favorable conditions. 

106. FACTORS DETERMINING THE SIZE OF THE FARM 1 
By W. J. SPILLMAN 

The farms in the Atlantic Coast states were established at a time 
when the family farm was necessarily small because of the lack of 
labor-saving implements. The owners of these small farms produced 
nearly everything they needed in the way of food and clothing. They 
naturally produced a very small surplus, which went to feed the 
cities. Under these conditions only a small proportion of the popula- 
tion could live in cities, because the surplus of farm products over and 
above the needs of farm families was so small. But about the time 
when immigration began to flow over the Alleghany Mountains and 
spread out in the broad Mississippi Valley, covering one of the most 
extensive and most fertile agricultural regions in the world, improved 
farm machinery began to be invented. This permitted a farm family 
to farm a much larger area of land. 

The effect of this migration into the Mississippi Valley and the 
development of more efficient farming with labor-saving implements 
was overwhelming on the small farms of the Atlantic Coast. The 
period between 1840 and 1850 witnessed the most tremendous revo- 
lution in agriculture in the Atlantic Coast states that has ever occurred 
in this country. A small hint of the disaster which overtook eastern 
farmers during that decade is seen in the following facts: In Chester 
County, Pennsylvania, which at that time was one of the leading 
agricultural counties of the country — and which still maintains pre- 
eminence as a farming region — the number of swine fell from 65,000 
in 1840 to 36,000 in 1850. These small Chester County farms, on 

1 Adapted from The Annals, May, 19 15, pp. 69-70. 



338 AGRICULTURAL ECONOMICS 

which it was not practicable to use the more modern methods of crop 
production, found themselves poorly prepared to compete in swine 
production with the large farms of the West. The disaster to the 
sheep industry was much more marked, the numbers having fallen 
during the decade from 56,000 to 13,000. At the beginning of this 
decade the production of beef was perhaps the most important phase 
of agriculture in Chester County. In the beginning of the decade 
there were 39,000 beef cattle in the county. Competition with the 
West reduced this number rapidly, and the reduction continued 
until 1890, when only 11,000 head of these cattle remained in the 
county. Practically the only live-stock industry left to these 
farmers was dairying, and it is a bitter pill to the stockmen whose 
business has been based upon beef cattle, swine, and sheep to 
descend to the continuous and laborious work of caring for dairy 
cows and their products. In 1840 there were 16,000 dairy cows 
in Chester County, Pennsylvania; in 1890 there were 49,000, 
and dairy products now constitute by far the most important source 
of income in the county. The small farms in the region could be con- 
verted into modern family farms only by some such intensive type 
of farming as dairying, as they are not adapted to fruit and vegetables. 
What has been said above applies practically to the whole North 
Atlantic Coast. Small farms still predominate in that region, but the 
reasons are at least partly historical, and not wholly economic. In 
the West, which was settled up after labor-saving machinery had 
been generally introduced, these small farms are few in number and 
are gradually disappearing to make place for the more effective large 
farm. In general, farm management investigations have demon- 
strated that the smallest effective area for a farm is that which will 
give constant employment at productive labor to the average farm 
family. It may be any amount larger than this, provided the farmer 
himself is capable of managing to advantage a larger amount of labor. 

107. APPORTIONING THE FACTORS OF PRODUCTION 1 
By E. DAVENPORT 

We are just emerging from a pioneer agriculture, in which land 
had little value, because it was abundant, and labor was the principal 
element in the cost of production. If the American farmer has been 

1 Adapted from Circular No. 277, Agricultural Experiment Station, University 
of Illinois, pp. 3-8. 



ORGANIZATION OF THE AGRICULTURAL ENTERPRISE 339 

wasteful of fertility it is because he has had it to waste, but he has 
been exceedingly economical of labor, which was costly, and has pro- 
duced the cheapest food the world has ever eaten, or ever will eat, 
though the yields per acre have been little more than half those of 
older countries. Our question has been not how much per acre but 
how much per man, and in this the American farmer has been right 
even though his average yields have been low. 

We are, however, approaching old-country conditions. Land is 
growing scarce, and therefore costly, so that elements other than labor 
have begun to enter into the cost of production and food is necessarily 
higher. 

Under pioneer conditions the highest yields have been the most 
profitable, because they were the result, not of expensive methods of 
farming, but of especially rich spots of land or of favorable seasons, 
costing nothing extra beyond the increased expense of harvesting. 
It is still true that high yields are profitable if they can be cheaply 
produced, but the general principle is that the higher the yield the greater 
the cost, not only per acre, but per bushel. 

This natural operation of the economic law of diminishing returns 
in farming is best illustrated by an experiment begun many years ago 
by Lawes and Gilbert at Rothamsted, England, the oldest experiment 
station in the world. They applied, every year for twelve years, 
different amounts of complete fertilizer to adjoining fields of wheat, 
with the following results: 



Fertilizer 
Applied 


Average 
Twelve Years 


Increase 


Increase per 
200 lbs. 


None 


18.4 bu. 
28.4 bu. 
36.4 bu. 
38 . bu. 






200 lbs. . . . 
400 lbs ... . 
600 lbs ... . 


10. bu. 
18.0 bu. 
19.6 bu. 


10. bu. 
8.0 bu. 
1.6 bu. 



By this we see (fourth column) that as an average of the 
twelve years the first 200 pounds of fertilizer returned 10 bushels, 
but that a second 200 pounds increased the yield only 8 bushels 
above the first, and that a third 200 pounds returned but a little 
over a bushel and a half above the double dose, showing that 
increased outlay is not always followed by correspondingly increased 
yields. 



340 



AGRICULTURAL ECONOMICS 



The experiment was continued, and at the end of fifty-two years 
the results were as follows: 



Fertilizer 
Applied 


Average 
Fifty-two Years 


Increase 


Increase per 
200 lbs. 


None 


14.8 bu. 

23.9 bu. ' 
32.8 bu. 
37.1 bu. 






200 lbs. . . . 
400 lbs. . . . 
600 lbs ... . 


9 . 1 bu. 
18.0 bu. 
22.3 bu. 


9 . 1 bu. 
8.9 bu. 
4-3 bu. 



These figures for half a century show the same principle of 
diminishing returns in a modified form. Owing to soil exhaustion, 
the yields from the unfertilized land decreased during the fifty-two 
years. On account of a few bad seasons, the average effect of the 
first dose (200 pounds) was slightly decreased. Owing to the accumu- 
lation of residues of fertilizer, the effects of the second and third doses 
were relatively larger than for the twelve-year period, though subject 
to the same law of diminishing returns. That is to say, the last dose 
of fertilizer was less than half as effective as the first; or, what is the 
same thing, the last increment of increase cost more than twice as 
much per bushel as the first. 

In the more intensified agriculture that is just ahead of us the 
question is, therefore, not how much the farmer can produce per acre, 
but how much he can a ford to produce. His yield must depend, not 
mainly upon his knowledge of production, but upon the price of the 
product. 

For example, in the tables quoted, each 200 pounds of fertilizer 
cost $7 . 50. With wheat at a dollar a bushel, a little computation will 
show that both the single and the double applications would pay, but 
that the triple application would swallow all the profits and more. At 
eighty cents a bushel, none of the treatments would pay, and both 
the farmer and the public would have to be contented with the lower 
yields from untreated land until such time as the consumer was 
willing to pay a higher price for his food. In this way is yield depend- 
ent upon price, and it is the natural way in which supply adjusts 
itself to demand as expressed in price. 

Of the same tenor is the experience of the University, which is 
producing corn yields varying from 26 bushels per acre on continuously 
unfertilized land to an average of 93 and a maximum of 120 bushels 
per acre on land which is excessively fertilized. It is making no 
money on either extreme : in the one, because the yield is not sufficient 



ORGANIZATION OF THE AGRICULTURAL ENTERPRISE 341 

to pay the labor; in the other, because the fertilizers are so costly as 
to swallow all the profits. The problem of the farmer, therefore, is to 
determine at what point between these extreme yields he must aim to 
fix his average yield, and in determining this point he must take 
into consideration the value of his land, the cost of labor, the cost of 
fertilizer, and the probable price he will receive for his product. 

From this we see the impossibility of " doubling yields without 
increased expense," and also that when prices drop the income of 
even the best farmers must decline, for extreme yields are profitable 
only with high prices. It must be clear that we cannot recklessly 
increase the yield per acre. 

On the other hand, we cannot continue the old-time wasteful 
methods of soil exhaustion, cheap and effective though they were in 
their day, because they are resulting in decreasing yields in the face 
of increasing demands. If our declining yields due to soil exhaustion 
are to be arrested and turned into even a slight increase to meet the 
growing demands, it is clear that new methods must be employed, but 
the object must be a moderate increase in yield by economic methods, 
and not extreme yields, which are bound to result in loss to the farmer 
or in prohibitive prices for food or both. 

Our farming is now in a transition stage between the "extensive 
agriculture" of the pioneer, in which fertility is disregarded and there 
is no investment but labor, and the " intensive agriculture" of old and 
densely populated countries, in which the main question is yield per 
acre, resulting either in high cost of food or in poorly paid labor. 
(China produces the most per acre but pays its laborers the least.) 

Our present yields are below what the climate and the general 
situation ought to produce, owing mainly to certain adverse condi- 
tions that can be cheaply and easily corrected, and money put into 
this channel will well repay the investment because it will increase 
the yield without being subject to the law of diminishing returns. 
This is where our present duty and opportunity lie in establishing the 
foundations of a permanent agriculture. It must be remembered that 
we have not yet reached the intensive stage, where it will pay either 
the producer or the consumer to attempt maximum yields on American 
land. 

In the transitional stage, in which our yields are kept down by 
certain adverse conditions, the first step in a rational procedure is the 
correction of these conditions by relatively inexpensive methods, such 
as the use of lime to correct acidity, the application of cheap forms of 



342 AGRICULTURAL ECONOMICS 

phosphorus or of potassium to balance fertility, keeping nitrogen 
always the limiting element, a better adjustment of crops to soil and 
to locality, and the organization of more economic systems of farming, 
with special attention to live stock, the distribution of labor, and the 
investment of capital. All the advice given out by the University 
of Illinois at this juncture is based upon this principle, because invest- 
ments of this character, whether of labor or of capital, are certain to 
increase the yield with relatively slight expense. Having done what 
we can in this way, we may await with confidence the intensive stage, 
the coming of which will be characterized by a permanent rise in 
prices. 

The greatest hazard in farming is the season, against which 
improved methods are only a partial protection. The farmer with 
little or no capital must confine himself to practices that will pay 
every year, while the man with considerable means is free to follow 
those more expensive methods which pay best in the long run, even 
though an adverse season now and then might show a loss. This lack 
of capital cannot be remedied by short-time loans to the small farmer, 
nor by loans of any kind to the farmer whose yields are limited by 
bad cultivation or to the one incapable of managing his business upon 
the more complex and, to him, more dangerous basis that will be at 
once established when he attempts to increase his yield by a larger 
use of capital. 

It is commonly said that not enough floating capital is invested 
upon American farms, and it is doubtless true, but it must be remem- 
bered, both in extending credit and in making loans, that the American 
farmer has had little experience in handling capital. Manifestly, 
therefore, when he borrows, both he and the lender must be satisfied 
that the loan will be judiciously used, or it may result disastrously. 

The student of agriculture cannot fail to see the danger of over- 
capitalization in attempts to secure abnormally high yields, a danger 
which increases as the practice spreads, for although one man may 
safely increase his yields without depressing the price, if all farmers 
were to follow his example the price would drop and all would lose 
money. Under this principle a few farmers will always be practicing 
methods not practicable for the mass. 

This circular is issued, not as an argument for poor farming nor 
for the continuance of old-time methods, but to point out that we 
are not to step at once and blindly into expensive forms of intensive 
agriculture. We should ascertain and practice those relatively inex- 



ORGANIZATION OF THE AGRICULTURAL ENTERPRISE 343 

pensive methods belonging to a transition stage that correct bad 
conditions and thereby considerably increase the yield without 
seriously raising the price, so that the results may be profitable alike 
to the farmer and to the public whom he serves. 

D. Large- vs. Small-Scale Production 
108. THE PASSING OF THE BIG FARM 

a) THE BREAK-UP OF THE PLANTATION 1 

In all of the five geographic divisions, with the exception of the 
North Central, the increase since 1850 in the number of farms has 
been relatively greater than that in farm area, and consequently the 
average size of farms, with the exception above noted, has decreased 
during the same period. In the accompanying table the average size 
of farms is given by geographic divisions for each census year, begin- 
ning with 1850. 

TABLE III 

Average Number of Acres per Farm, By Geographic Divisions: 
Summary 1850- 1900 



Geographic Division 


1900 


1890 


1880 


1870 


i860 


1850 


The United States.. 


146.6 


136.5 


133-7 


153-3 


199.2 


202.6 


North Atlantic 

South Atlantic 

North Central 

South Central 

Western 


96.5 

108.4 

144-5 

155-4 
386.1 


95-3 
133-6 
133-4 
144.0 

324-1 


97-7 
157-4 
121. 9 
150.6 
312.9 


104 -3 
241. 1 
123.7 
194.4 
336.4 


108. 1 
352-8 
139-7 

321.3 
366.9 


112. 6 
376.4 
143-3 
291.0 

694.9 



An examination of the average size of farms for the individual 
states and that for the counties discloses in many of the older settled 
communities a decrease in the average size of farms. This is most 
marked in the cotton-growing states, where it is the result of sub- 
division of the larger holdings and the leasing of smaller areas to 
tenants, the size depending upon the amount of land which the tenant 
can properly cultivate by his own labor. This movement began 
shortly after the close of the Civil War, and is still in progress in most 
sections where large areas are devoted to the growing of cotton. Its 
extent may be measured by the reduction in the average area of 



Adapted from Twelfth Census of the United States, 1900, Vol. V, p. xxi. 



344 AGRICULTURAL ECONOMICS 

farms in the South Atlantic states from 376.4 acres in 1850 to 108.4 
acres in 1900. 

Throughout the United States, the increase or decrease in the 
average size of farms, therefore, is due to the changes incident to the 
adjustment of the agricultural operations of each locality to those 
branches of husbandry to which it is best adapted. It may be said 
that the average area of farms tends to approximate the area from 
which the farmer possessing average capital can secure the largest 
returns. 

b) THE FAILURE OF "BONANZA" FARMING 1 
By HENRY F. BLANCHARD 

The first grain producers of California attempted to crop as large 
an acreage as possible at a minimum cost. In order to do this, at 
that time all that was necessary was very shallow plowing (3 or 4 
inches in depth), broadcasting the seed and harrowing it into the soil. 
This was continued from year to year and fairly good crops were 
produced for a while. In the pioneer days the interior valleys were 
not considered of much value for the production of crops on account 
of the small amount of rainfall. At that time certain companies were 
enabled to secure large tracts of this land at a nominal price. These 
companies discovered that this land would produce good yields of 
grain and it was cropped on a very large scale. Since that time there 
has been a gradual breaking up of these large farms into smaller ones. 
However, there are still too many large ones; until the farms are so 
reduced in size that they may be properly handled we may look for 
continued low production and further depletion in the soil fertility of 
the wheat lands. 

Note. — We are all familiar, too, with the fact that the enormous 
wheat farms which were so striking a feature of the early days of one- 
crop wheat farming in the Red River Valley of Dakota have had to 
give way to the more moderate-sized and more diversified farms which 
apparently are to characterize our permanent type of agriculture. 
This cutting up of the great grain farms, and the mammoth cattle 
ranches as well, is reflected in the following figures of the census of 
1910: "In the West there was a decrease in the average size of farms 
from 694.9 acres in 1850 to 312.9 acres in 1880. This was followed 

1 Adapted from Bulletin 178, Bureau of Plant Industry, United States Depart- 
ment of Agriculture, pp. 8-1 1. 






ORGANIZATION OF THE AGRICULTURAL ENTERPRISE 345 

by a gradual increase during the next twenty years, but between 
1900 and 1 9 10 the average size of farms decreased from 386. 1 acres 
to 296.9 acres." 1 — Editor. 

109. THE LITTLE FARM WELL TILLED 2 
By BOLTON HALL 

A new boom is on, the farm land boom; a new development is 
beginning, intensive agriculture; a new discovery, the riches of the 
soil; a new opening, the intelligent use of " the little lands." It does 
not demand any more brains than any of the other opportunities 
and it is open to a far larger number. "The profit of the earth is 
for all." 

A few acres is enough, with modern methods and active minds. 
A. R. Sennett, in a recent publication, shows that it requires at least 
two acres of farm land, as at present cultivated, to feed each one of 
the people of America with grain and vegetable products. Again, 
he estimates that it requires at least an additional acre of pasture land 
on which to raise our beef or animal food; or three acres to feed each 
person. These estimates are based on the present ordinary wasteful 
methods of culture and pasturage. 

One irrigated acre has for thirty years given Samuel Cleeks, of 
Orland, Glenn County, California, a larger net income than many of 
his neighbors get from hundreds of acres apiece. Mr. Cleeks saves 
an average of four hundred dollars per year after getting a good living 
from his acre, while many are becoming poor trying to run big farms 
without irrigation. 

In the Eastern and Middle states are chances to do just as well 
on a single acre. Oliver R. Shearer, of Hyde Park, Pennsylvania, 
makes $1,200 to $1,500 a year on 3! acres, of which he cultivates 
2 J acres. He has raised and educated three children and paid $3,800 
for his property out of the profits of his intensive farming. D. L. 
Hartman, of New Cumberland, Pennsylvania, in 1905 got $454 from 
an acre of early tomatoes and an equal amount from an acre and a 
half of late tomatoes. An acre and a half of strawberries brought 
him $555 and his early cabbages averaged about $300 per acre. He 
says that no one can fix the limit of value one acre can produce. 

1 Thirteenth Census of the United States, Vol. V, p. 62. 

2 Adapted from A Little Land and a Living, pp. 77— 7S, 109-12, 271, i%$. 
(Copyright by Bolton Hall. Published by the Arcadia Tress.) 






346 AGRICULTURAL ECONOMICS 

One-sixth of an acre planted to radishes and lettuce, followed by 
eggplant and cauliflower, and the next year to radishes alone,iollowed 
by eggplant, brought over $200 each year; at the rate of over $1,200 
an acre. Again, $86 . 78 was received from one thirty-second of an 
acre, at the rate of $2,780 per acre. This amount could have been 
raised to $4,000 an acre; all without using glass. 

"In my judgment, working early and late to raise more corn to 
feed more hogs, in order to buy more land, is not farming but specu- 
lation. The great fault of American agriculture is too much land." 
That condition is passing away, and the farmer is learning that the 
small farm near the town is the money-maker. The time is at hand 
when the principles we are laying down in this book for specialties will 
be applied to the great staples, and we shall be able to double and 
redouble our yields. 

The most important thing to teach today is how to make the 
greatest profit from the least land. When the farmer has learned 
that, he will have no cause to fear the absorption of farms into 
large holdings. The value of the farm lies chiefly in the farmer, 
so that a very small tract by intensive cultivation will give a good 
living and provide for old age. Even two acres will do this and 
more than this. 

no. THE SIZE OF FARMS AS RELATED TO PROFITS 1 . 
By G. F. WARREN and K. C. LIVERMORE 

Many persons who are not engaged in farming, and some farmers, 
believe that smaller farms better tilled will bring greater profits. All 
the figures that we have secured in this county, as well as figures 
secured from five townships in Livingston County, show that the 
larger farms are much more prosperous. The fact that there are not 
nearly so many farms as formerly shows the change in farming to meet 
the conditions that call for larger farms. The fundamental cause of 
this change is the change from hand labor to the use of machinery. 
And since more and more machinery is being used, it is to be expected 
that farms will continue to increase in size for some time. 

This does not mean that large "bonanza" farms are to develop. 
The group of largest farms averages only 261 acres. All the farms 
are the typical American "family-farm," on which the farmer and his 

1 Adapted from "An Agricultural Survey of Tompkins County, New York," 
Bulletin 2Q5, Cornell Experiment Station, pp. 415-17. 



ORGANIZATION OF THE AGRICULTURAL ENTERPRISE 347 

family do the major part of the farm work. Even on the farms con- 
taining over 200 acres the family does half of the farm work. These 
figures may, therefore, be taken as suggesting the most profitable size 
for a family-farm. The larger farms seem to be better than the 
smaller ones for this purpose. 

These figures do not throw any light on the desirability of the very 
large farm, on which the farmer is so busy managing that he does not 
do any manual labor. From observation the writers are of the opinion 
that such farms have many serious obstacles in their way. They are 
not likely to be able to handle labor effectively. The farmer who 
works with his men and directs them as he works, and who treats his 
hired men as equals, has a great advantage. 

There can be no question but that the larger farms are paying 
better. But some persons may say that the difference is due, not to 
the size of the farm, but to the farmer, and that the better farmers 
live on the larger farms. If small farms are the best size, it would 
seem as if the more intelligent farmers would choose them. If the 
more intelligent men all choose large farms, there must be some reason 
for it. Certainly there must be some good farmers living on small 
farms. If the small farm offers the best opportunities, these farmers 
should be doing exceedingly well. 

TABLE XXVIII 

Variation in Profits with Different Sizes of Farms; 586 Farms Operated 

by Owners 





Percentage of Farms of Each Size Making Labor Incomes 
as Designated 


Acres 


— $200 
or 
less 


—$199 
to 


$1 to 
$200 


$201 
to 

$400 


$401 

to 

$600 


$601 
to 

$800 


$801 

to 

$1,000 


$1,001 

to 
$1,500 


Over 

$1,500 


30 or less 

31- 60 

61-100 

101-150 

151-200 

Over 200 


Per- 
centage 

7 
2 
2 

S 
2 
6 


Per- 
centage 
10 
II 
II 
11 
5 
3 


Per- 
centage 
40 
33 
23 
15 
14 
14 


Per- 
centage 

33 
29 

23 

22 

21 

6 


Per- 
centage 
IO 
16 
20 
20 
19 
15 


Per- 
centage 
O 
7 
13 
9 
4 
12 


Per- 
centage 
O 
I 

4 
6 

7 
12 


Per- 
centage 
O 
I 
2 
8 
16 
12 


Per- 
centage 
O 
O 

4 

12 
20 



Of 138 farmers on farms of less than 61 acres, only 10 made a 
labor income as high as $600. Of 234 farmers with over 100 acres, 
79 made over $600. 



348 AGRICULTURAL ECONOMICS 

Of 138 farmers on farms of less than 61 acres, only one man made 
a labor income of $1,000. Of 34 farmers on farms of over 200 acres, 
11 made over $1,000 labor income. 

Small farms have many disadvantages. A large part of the farm 
work cannot be done economically without at least two men. But 
many of the smaller farms do not have enough work to keep a hired 
man fully employed. The cost of labor is excessive on small farms, 
also the cost of horse labor. The cost of producing crops on the small 
farms is also increased because of the lack of machinery. If a farmer 
is able to manage horses and machinery to good advantage it may pay 
him to go in debt for additional land. 

Sometimes it is very difficult to purchase land that adjoins one's 
farm. The line fence is one of the greatest obstacles in the way of 
eastern agriculture. The farms are not well laid out, and it is often 
impossible to purchase so as to make a farm of satisfactory area and 
shape. It will sometimes pay to sell and buy where a satisfactory 
area can be secured. 

Many owners have enlarged their acreage by renting additional 
land. Of the owners for whom a labor income was calculated, 14 per 
cent also rented land. This, together with the consolidation of farms 
by purchase, shows how many men recognize the importance of 
increased acreage. Eighty-six farmers who rented additional land 
owned an average of 89 acres and rented an average of 51 acres. This 
gave them 35 acres more than the area operated by the average owner 
who did not rent. Their average labor income was $522, which is 
$115 more than the amount made by the average owner who did not 
rent. For general farming these figures show that a farm should con- 
tain at least 150 acres. 1 The upper limit of area is determined chiefly 
by the layout. With ideal conditions, with the buildings in the center 
of the farm, and with a public road running past the buildings, as high 
as 600 acres may be run from one center. With more than this area 
the distance of the fields from the buildings is usually too great. It 
is not often that one can secure so large an area well located with 
respect to buildings. The most profitable general farms in Tompkins 
and Livingston counties contain about 200 to 300 acres of good 
land. 2 

1 Other studies have shown the same result. See especially Bulletin 41, 
United States Department of Agriculture. 

2 The remainder of this reading is from Bulletin 34Q of the same station, 
pp. 677-68. By G. F. Warren. 



ORGANIZATION OF THE AGRICULTURAL ENTERPRISE 349 

The above discussion applies to general farming and dairy farm- 
ing, but, whatever the type of farming, the farm should be large 
enough to allow for the use of the well-established labor-saving prac- 
tices, and large enough to provide a variety of products that make a 
full year's work. For truck growing, 80 acres may be as large as 300 
acres in general farming. An acre partly covered with greenhouses 
may be an equally large business. 

There is much discussion of this subject by persons who have had 
no farm experience or whose farm experience was gained before 
manure-spreaders, potato-diggers, and hay-loaders were invented. 
These persons usually advise little farms rather than 150- to 200-acre 
farms. The advice is also constantly given that farmers turn to 
truck growing. The supply of truck crops is easily overdone. It is 
usually unwise to grow truck crops unless both the soil and the 
markets are particularly adapted to such crops. The vast majority 
of our farmers must continue to produce wheat, milk, hay, oats, 
potatoes, and the general farm crops. Such advice is usually given 
under the impression that small farms and truck crops will reduce the 
cost of living in cities. Under American conditions, the full-sized 
farms produce farm products at least cost, so that the little farm is 
not desirable from any standpoint. Farmers are quick to respond 
whenever any type of farming promises greater profits. They change 
to truck growing whenever conditions warrant the change. 

A farm of 1 to 20 acres makes an excellent home if one has some 
other source of income, but a general farm of this area is very poor 
business. A farm is a place to work. The man who buys a farm buys 
a permanent job. If the farm is not large enough to provide a fair 
amount of productive work, it must of necessity be a very poor 
business. 

E. Some Problems of the Farm Manager 

in. THE FARM LAYOUT 1 
By W. M. HAYS 3 

Spend some time in devising a suitable plan for the arrangement 
of buildings, fields, fences, etc., on the farm, and estimate the necessary 
cost of installing it in order to save useless expense in travel to and 

1 Adapted from Bulletin 236, Bureau of Plant Industry, United States Depart- 
ment of Agriculture, pp. 10-13, 34- 

2 Andrew Boss, A. D. Wilson, and Thomas P. Cooper, co-authors. 



35° 



AGRICULTURAL ECONOMICS 



from fields, in working awkwardly shaped fields, and in poorly 
arranged farmsteads, and in unnecessary fencing. Plan the farm 
before developing the farmstead, when this is practicable. 

Locate the farmstead of the family-sized farm on the highway, 
near the center of one side rather than at the corner or in the center 
of the farm, thus avoiding social isolation from being distant from 
some fields by being at the corner. Thus secure the advantages of 
being on the highway, where more people will call, of having fields 
easily accessible on three sides of the farmstead for small pastures, 
and of having short lanes which give easy access to all fields. Arrange 



Whec 


if 




rermanent 






^9°^ 




<^ Oats 








Corn 







IfiS Wheat 

fit* Grass 

/V8 6rom 


/VIS 6r«SS 

lb " 

11 Qra'm 
l$Corn 
i<* Wheal 


D 


1911 Corn 


19 IS Grass 
l6Gra,n 

nc.m 

tgV/r.ea.1 
11 Grass 


c 


IS 

Corn 

IL 

Wheat 

n 

Clow 

H 


Clover 

14, 

corn 
S.rape 

n 
wheat 

G 


wheat 

lb 
clover 

n 

Corn 


l1lSGra,n 
iLCrn 

1, 'Wheat 

ISSrASS 

11 - 


B 


tflSCorn 

'6 Wheat 

H Grass 

IS i 
ITSrajn 


A 





Fig. 9 



so that one corner of each field is as near the farmstead as may be, that 
men and teams may be quickly at work upon leaving the farmstead, 
and that time may be saved in getting stock to and from the fields for 
pasture, and also to avoid waste of land and fencing in long lanes. 

In planning the fields, take into consideration the fact that the 
nearly square field requires less fencing. On the other hand, that the 
longer the field the more easily the team work is done, and in deciding 
consider the number of horses used in the fields and the kinds of crops 
grown. For example, if a field is to be in pasture most of the time, 
the more nearly square form may be used, while if often plowed and 
cultivated there is reason for the longer form of field. 

The change needed on most farms in a new country is to avoid 
growing grain and cultivated crops continuously on one part of the 
farm and hay and pasture on another part. Alternating these three 



ORGANIZATION OF THE AGRICULTURAL ENTERPRISE 351 

classes of crops in an efficient rotation, and thus improving the 
productivity of the soil, often reduces the expense of labor (as the 
plowing), better distributes the labor throughout the year and, by 
growing more crops to be fed out in winter, increases the value of 
products sold, returns fertility to the soil, and enlarges the profits 
on all parts of the farm. 

The maps in Fig. 9 illustrate how a five-year rotation actually 
applies to a Minnesota farm. This farm contains 160 acres, all of 
which is tillable but is poorly organized. The average distance from 
the farmstead to the fields is seventy rods, and the total amount of 
inside fencing required to fence all of the fields is 892 rods. The map b 
is the same farm reorganized for a five-year rotation. With this 
arrangement the average distance of fields from the farmstead is but 
twenty-four rods. The amount of inside fencing required is only 
640 rods. The crops are each year to be changed by rotation so that 
each field will produce each crop once in five years. 

112. EFFECTIVE ORGANIZATION OF THE WORKING FORCE 1 
By W. J. SPILLMAN 

In studying farm organization, our interest in the crop relates to 
the amount and kinds of labor required in the management of the crop 
and the equipment necessary in performing that labor. In order to 
formulate a cropping system that will give an equitable distribution 
of labor during the season, we must know the following facts concern- 
ing each crop to be used in the system: 

1. The kind and number of operations required by the crop from the 
beginning of the seed-bed preparation to the marketing of the product. 

2. The crews (men, horses, and machinery) that may or should be used 
in performing these operations. 

3. The dates between which each operation mayor must be performed. 

4. The amount of work each crew should perform in a day. This in- 
volves standards of farm labor for all possible kinds of farm work. 

5. The proportion of time at all seasons of the year that can be devoted 
to the kind of work to be done. This requires a knowledge of the average 
amount of time lost because of unfavorable weather, holidays, unavoidable 
delays, etc. 

These five classes of data concerning a farm enterprise constitute 
the fundamental farm-management data concerning that enterprise. 

1 Adapted from Bulletin 259, Bureau of Plant Industry, United States Depart- 
ment of Agriculture. 



352 AGRICULTURAL ECONOMICS 

Until they are made available it will be impossible to work out, except 
by the slow and costly methods of experience, systems of farming 
that will give a satisfactory distribution of labor and which will give 
the farmer something profitable to do at all seasons of the year, while 
at the same time no part of the year will be so crowded with labor as 
to make it difficult to get the work done in its proper season. With 
such data it will be possible to formulate systems that will not only 
distribute the labor advantageously but will greatly reduce the number 
of work animals necessary to farm a given area. The average farm 
horse in the northern states works on the average for the year only 
about three hours a day. Yet at certain seasons of the year he not 
only works 10 or 12 hours, but the farmer seldom has enough horses 
to do the required work. With a properly planned cropping system 
it will be possible so to distribute the horse labor as to secure twice 
the above amount of work per horse, thus reducing by one-half the 
number of horses required to farm a given area. By distributing the 
work in this manner it will become possible to prevent a great deal of 
duplication in farm implements as well. 

Most farm enterprises have a critical period; that is, they require 
more work at some seasons of the year than at others. The cotton 
crop, for instance, has two periods at which it demands an unusual 
amount of work — i.e., chopping out (thinning) and picking. A man 
can prepare the land, plant, and cultivate a much larger area than he 
can chop out or pick. It is customary in the cotton states for all the 
members of the grower's family who can handle a hoe or pick cotton, 
both light tasks suitable to women and children, to aid at these 
critical periods. Even with this help one man can still do all the 
other work on a much larger crop than an ordinary farm family can 
care for during the critical periods. It is clear that the limiting factor 
in the area of cotton a farmer can manage properly is the area he and 
his available labor can thin and pick. Where the available labor is 
limited to the members of the farmer's family, this area is so small in 
the case of the average family that a single horse can do all the horse 
labor required on the farm. This accounts for the general prevalence 
of one-horse farming in the South. So long as southern agriculture 
is based as largely on cotton as it has usually been during the last 
generation, the one-horse farm will be an economic necessity. 

There is a better way, however, even for the cotton country. By 
the proper selection of enterprises the cotton grower may produce a 
large acreage of other crops, especially if he utilizes two horses, without 



ORGANIZATION OF THE AGRICULTURAL ENTERPRISE 353 

cutting down the acreage of his cotton crop. But to do this it will 
be necessary to select enterprises that will not require much attention, 
if any, during cotton chopping or picking time. One of the big farm- 
management problems of the South is the formulation of systems of 
farming that will utilize the forces that now go to waste at seasons 
when the cotton crop does not completely employ the farmer's time 
and equipment. 

The critical periods for the potato crop are planting and harvest. 
Corn is a crop that has no strictly critical period. It gives about the 
same amount of work at all times, from the beginning of plowing the 
seed bed to the last cultivation. Even at harvest time one man can 
gather all the corn he can grow, though it is customary to employ 
extra labor at this time. Generally speaking, farm enterprises have 
one or more periods when so much work is required that those periods 
determine the extent of the enterprise in any given case. 

We have already seen that the limiting factor in the area of cotton 
an average farmer can grow is the quantity the members of his family 
can pick. This is about seven bales. On ordinary uplands, where 
the yield is about one-third of a bale per acre, this means about 20 
acres of cotton to the family. One horse can till this acreage, and 
as no other money crop is grown a farm of this size is usually a one- 
horse farm. A few acres of corn are grown, but as there is only one 
horse and as the cotton tillage keeps him quite busy, the corn is poorly 
tilled and yields very little. Because the implements used are all 
one-horse implements, the preparation of the seed bed for cotton, the 
planting, and the tilling keep the farmer busy from early in the spring 
until late in July. The picking then occupies the fall season quite 
completely. Thus, the one crop gives the farmer employment during 
nearly the entire season. This is one of the reasons that the single- 
crop system of cotton growing has persisted so tenaciously in the 
South; it gives employment pretty nearly as constantly as a well- 
planned system of farming would do, and thus enables the farmer to 
earn a living. The difficulty is that it does not utilize the full possi- 
bilities of the man and therefore gives him a poor living. When a 
man is following a 6-inch plow or a 12-inch sweep drawn by an 800- 
pound mule his time may be fully but not well utilized, and he is not 
working at his full earning capacity. What the cotton growers of the 
South need are systems of farming that will permit one man to employ 
the full power of two or, better, four horses throughout the season. 
This would greatly increase the earning capacity of the individual. 



354 AGRICULTURAL ECONOMICS 

If the good farm lands now unused, mostly in second-growth 
timber, were devoted to such cropping systems the South could with 
its present working force grow approximately its present acreage of 
cotton and at the same time devote twice or three times this area to 
other crops. This would, of course, require a large increase in the 
number of work animals used as we'll as in implements, and this would 
call for much more capital than is now available to the farmers of 
that section. When the problems here briefly discussed have been 
worked out for the South and southern agriculture begins rapid 
expansion to its full possibilities, there will be great need of sources 
of agricultural credit so that the money may be had for that develop- 
ment. 

In the Pacific Northwest there exists a peculiar system of agricul- 
ture which illustrates some of the principles here discussed. In cer- 
tain sections the farmers grow little else than wheat. Unlike cotton, 
this crop has no critical period during which it requires a vast 
amount of hand labor, but can be handled from start to finish almost 
entirely by horse or mechanical power. 

In eastern Washington the limit to the area of this crop one man 
can grow is the acreage of land he can prepare for seeding. In the 
preparation of the land one man can easily utilize five or six horses, 
and we actually find this number commonly used by one man. All 
the implements are made as large as practicable. By a further 
ingenious device the season for preparing the land is lengthened. A 
given field bears a crop only once in two years. The farmer therefore 
has a long time in which to prepare the land. But this time is not as 
long as might be expected, because the winters in that section are too 
wet to permit much field work and the summers are so dry that the 
soil soon becomes too hard to plow. But by double disking the land 
very early in the spring, which can be done before it is dry enough to 
plow, a mulch is created which keeps the soil mellow till late in June. 
Thus, with 5-horse teams and a comparatively long season in which 
to do the plowing, a large area can be prepared by one man. In fact, 
the typical size for a one-man exclusive wheat farm in that section is 
about 320 acres, on which 160 acres of wheat are grown annually. 
Managed in this way, a wheat farm gives the farmer plenty of profit- 
able work to do from early in the spring until nearly harvest time. 
Then the harvest season gives another long period of work. In that 
region the varieties of wheat grown will stand several weeks after 
they are ready to cut, so that the harvest season is greatly prolonged, 



ORGANIZATION OF THE AGRICULTURAL ENTERPRISE 355 

and with the system of harvesting in vogue there is no trouble about 
getting all the wheat cut and thrashed that a farmer can grow. When 
harvest is over it is about time to begin sowing a new crop on the land 
that was plowed in the spring. 

The only way the cotton grower can get into the class of the wheat 
grower from the standpoint of income is by hiring a large amount of 
human labor at low wages for the two hand operations the cotton 
crop requires. As a result of this condition, most of the cotton is 
grown under a tenant system by poor people, while wheat is grown by 
the owner of the land himself, who is usually a well-to-do farmer. 
This applies, of course, only to the localities where the methods out- 
lined are practiced. 

A financial comparison of the two one-man systems of farming is 
shown in Table I. 

TABLE I 

Comparison of Two One-Man Systems of Single-Crop Farming 





Charges 


Income 


Crop 


Rent 


Interest and 
Depreciation 
on Equip- 
ment 


Total 


Gross* 


Labor* 


Cotton 

Wheat 


$ 72f 

i,i5 2 § 


$ 15 
165 


$ 87 
1,317 


$ 35ot 
2,88o|| 


$ 263 
1,563 



* The farm expenses other than rent, depreciation, and interest on crop equipment are not here 
taken into account. Hence the labor income given is not the net income, 
t Twenty acres at $3 . 60. 
t Seven bales from 20 acres. 
§ Three hundred and twenty acres at $3 . 60. 
|| Four thousand eight hundred bushels (from 160 acres) at 60 cents. 



113. ECONOMY OF HORSE LABOR 1 
By G. F. WARREN 

The economical use of horse labor is as important as man labor. 
In Minnesota, in 1907, the cost of an hour's work of a team in different 
counties varied from 15 to 22 cents per hour (see table).. Man labor 
averaged about 12 cents. The time of the team is, therefore, worth 
much more than the time of the driver. Where feed is worth more, 
the difference is still greater. There are few, if any, regions in the 

1 Adapted from Farm Management, pp. 344-49. (Copyright by the Macmillan 
Co.) 



356 



AGRICULTURAL ECONOMICS 



United States where horse labor is cheaper than in Norman County, 
Minnesota. On New York farms, horse labor usually costs 25 to 30 
cents per hour for a team. Man labor costs 15 to 20 cents per hour. 
Economy of horse labor is, therefore, seen to be even more important 
than economy of man labor. 

COST OF HORSE LABOR 



Norman County, Minnesota 
Lyon County, Minnesota 
Rice County, Minnesota. 
Farm No. 1, New York. . 
Farm No. 2, New York. . 
Farm No. 3, New York. . 



Year 


Food Cost 
per Horse 


Total Cost 
per Horse 


Hours 
Worked 
per Day 


1907 


$ 47 


$ 77 


30 


1907 


64 


93 


3-4 


1907 


75 


104 


3-i 


1911 


92 


131 


2.9 


1911 


90 


174 


3-8 


1911 


117 


177 


4-9 



Cost per 
Hour 
Ceuts 



7-7 
9.0 
11. o 
14.9 
14.8 
131 



The chief reason for the high cost of horse labor is the large amount 
of time that horses do not work. On the farms in Minnesota the 




JAN. FEB. flAR. APR. HAY JUNE JULY AUG. SEPT. OCT NOV. DEC. 



Fig. 1. — Distribution of horse labor. Seven horses kept. If done at the 
proper time, the work could be better done with five horses. Black is work fixed 
as to time; white is work that could have been done at some other time. 



horses averaged a little over 3 hours a day for 300 days. On Farm 
No. 3 in New York, an unusually well-organized farm, they worked 
4.9 hours. This farmer kept lists of work for all kinds of weather, 
so that all odd jobs were done when the teams could not work. A 



ORGANIZATION OF THE AGRICULTURAL ENTERPRISE 357 

farmer should look upon an idle team in the barn in exactly the 
same way he looks upon a hired-man asleep in the haymow. If the 
high cost of horse labor were realized, horses would be worked 
more. 

There are many ways of saving horse labor. The most evident 
way is to keep the horse busy, and so reduce the cost per hour. By 
planning the work ahead it is often possible to do the work with 
fewer horses. The horse labor for Farm No. 1 is shown in Fig. 1. 
The farmer kept two extra horses at a cost of $262, when the only time 
he needed them was in plowing for oats and corn. If he had fall- 
plowed for oats, he would have secured a better crop of oats, could 
have fitted his corn ground earlier and better with two less horses, 
and have had considerable time to spare. 

One horse raises from 9 to 28 acres of crops in the different counties 
studied. In all these regions the larger and better managed farms 
doubtless raise more crops per horse. If a farm is diversified, good 
sized, and well managed, a horse can raise almost twice the average 
area of crops. On many well-managed farms there are 30 acres of 
crops per work horse or mule, and occasionally 50 acres when the 
crops include tilled crops, small grain, and hay in such combinations 
as to make a full season's work. If the crops are mostly tilled crops, 
the area per horse should rarely fall below 25 acres. 

114. THE PROBLEM OF THE FEEDER 1 
By HENRY PRENTISS ARMSBY 

Mechanically there is in some respects a very close likeness be- 
tween the animal body and what are known as internal-combustion 
motors, i.e., those engines in which power is developed by burning 
liquid or gaseous fuel (gasoline, alcohol, producer gas, etc.) in the 
cylinder of the engine itself. Such an engine requires two things for its 
operation: (1) sufficient repair material to keep its working parts in 
running order, and (2) a supply of fuel in proportion to the work to be 
done. Just these same two things are what the animal requires — 
repair material and fuel. 

In one respect, however, the animal body differs from the artificial 
machine — it cannot be stopped and started again at will. As long as 
the animal lives the vital machinery is in operation, although less 
actively at some times than at others. The animal might be 

1 Adapted from Farmers' Bulletin 346, pp. 9-10. 



358 AGRICULTURAL ECONOMICS 

compared to an automobile whose engine must be kept running 
at a low speed in order to have the power available when 
needed. 

That the feed of the animal is its source of both repair material 
and fuel is sufficiently obvious. If we knew exactly the requirements 
of the animal in any given case, and if we knew exactly what amounts 
of protein (repair material) and energy (the fuel material) the feeding 
stuffs at our disposal could furnish, the computation of a ration would 
be almost purely a matter of arithmetic. We should simply have to 
devise a mixture of the feeding stuffs which would yield the requisite 
amounts of protein and energy and would at the same time be of 
suitable bulk and of such a character as to exert no injurious action 
upon the animal. As a matter of fact, we have no such exact knowl- 
edge. Practically, animals vary in their requirements, while feeding 
stuffs of the same name show a wide range in composition, digesti- 
bility, and nutritive value. Furthermore, what is still more impor- 
tant, the economic conditions vary from case to case, so that, for 
example, a very liberal ration might be advisable in one instance, 
while for the same animal under different conditions it would be 
highly uneconomic. A man's ability as a feeder will be shown, first, 
in his power to estimate the conditions which will modify the feed 
requirements of his particular animals and cause his feeds to vary 
from the average, and, second, in the skill with which he can 
interpret the daily results and modify his feeding in accordance 
with them. 

When feeding stuffs must be purchased in order to get the desired 
relation between the protein and the energy of the ration, it is evident 
that often a wide range of choice may be offered. In such a case the 
question at once arises, which of the various feeds available it is most 
economical to purchase, it being evident, of course, that this is not 
necessarily the one offered at the lowest price. In all these and 
similar matters common-sense is necessary. The computed ration 
expresses the best estimate that can be made of the actual average 
requirements, but it is at best more or less of an approximation. It 
would be foolish, therefore, to seek extreme exactness in realizing it 
or to go to more expense in the weighing and apportioning of the feed 
than the saving in the latter would amount to. The scale upon which 
the feeding is conducted will play an important part. Where scores 
or hundreds of animals are being fed, an exactness may be profitably 
sought which would be absurd in the case of two or three animals. 



ORGANIZATION OF THE AGRICULTURAL ENTERPRISE 359 

115. ECONOMY IN THE USE OF PLANT FOOD 1 ' 
By CYRIL G. HOPKINS 

For practically all of the normal soils of the United States there 
are only three constituents that must be applied in order to adopt 
systems of farming that, if continued, will increase or at least perma- 
nently maintain the productive power of the soil. These are lime- 
stone, phosphorus, and organic matter. 

Where such natural materials as chalk and marl have not been 
accessible, more or less use has been made of water-slacked or air- 
slacked lime; because, by burning and slacking, limestone rock may 
be reduced to powdered form and thus distributed over the land. 
With the development of rock-crushing and rock-grinding machinery, 
fine-ground natural unburned limestone can be had, and, where 
material can be gotten at reasonable cost, it replaces all other forms 
of limestone used for the improvement of normal soils. The manu- 
facturer in hydra ting lime simply converts, at considerable expense, 
the slower acting carbonate to the caustic hydroxid form. This is a 
powerful agent in hastening the destruction of organic matter, stimu- 
lating the soil at the expense of permanent fertility. 

So much has been said and written regarding the value of farm 
manure that it is common talk that the manurial value of the food 
is almost wholly recovered in the manure; and there is even a vague 
notion in the minds of some that the manure is worth more for soil 
improvement than is the food from which the manure is made. The 
fact is that the most important and least appreciated method of 
obtaining or increasing the supply of organic matter in the soil is by 
the use of green manures and crop residues. A ton of clover plowed 
under will add nearly three times as much organic matter to the soil 
as can possibly be recovered in the manure if the clover is fed. Nitro- 
gen may also (besides that secured from organic matter produced on 
the farm) be bought in the market in such forms as dried blood 
(14 per cent), sodium nitrate (15 J per cent), and ammonium sulphate 
(20 per cent) ; but when we bear in mind that such commercial nitro- 
gen costs from 15 to 20 cents a pound, and that one bushel of corn 
contains about one pound of nitrogen, it will be seen at once that the 
purchase of nitrogen cannot be considered practicable in general 
farming, although in market gardening and in some other kinds of 

1 Adapted from Soil Fertility and Permanent Agriculture, pp. xxii, 157-0:. 199, 
200, 207, 237. (Copyright by Cyril G. Hopkins. Published by Ginn & Co.) 



360 AGRICULTURAL ECONOMICS 

intensive agriculture commercial nitrogen can often be used with 
marked profit. 

The average investment required for 25 pounds of phosphorus is 
about 75 cents in 200 pounds of fine-ground natural rock phosphate 
of good grade, about $2 . 50 in 200 pounds of good steamed bone meal, 
about $3 . 00 in 400 pounds of good acid phosphate, about $6 . 00 in 
600 pounds of the average " complete " commercial fertilizer, and about 
$80 in manure made from corn costing 40 cents a bushel. It is impor- 
tant to understand and to keep in mind that average farm manure 
is poor in phosphorus in comparison with its content of nitrogen and 
potassium, especially when made from the produce that remains after 
part of the grain has been sold from the farm, and more especially 
when used in connection with a rotation including legume crops and 
on soils abundantly supplied with potassium but poor in phosphorus. 
In other words, under such conditions average farm manure is a very 
poorly balanced fertilizer, and if used even in moderate quantities the 
production of stalks or straw is likely to be excessive in comparison 
with the yield of grain; and the small grains are also likely to lodge, 
because the unbalanced ration produces weakness even in straw of 
large growth. 

F. Forms of Business Organization 

116. INDIVIDUAL ENTERPRISE— THE FAMILY-FARM 1 
By G. F. WARREN 

Farming is essentially a home enterprise. It is very different 
from most city occupations. The success of a farm is dependent on 
the entire family. All the members of the farm family take some 
part in the farm business. The women usually help by taking care 
of the hens and in some of the other farm work. They go to town 
to get farm supplies, often board some of the hired help, and usually 
take a considerable part in other farm operations at times of unusual 
pressure of farm work. They often direct the farm work during the 
absence of the head of the family. Children on farms practically 
always help with the work. There are many things that a small boy 
can do as well as a man. This gives an elasticity to the farm labor 
supply, and results in considerable economies, since women and 
children can help out at rush times and avoid the hiring of other per- 

1 Adapted from Circular No. 24, Cornell Experiment Station, pp. 32-33, 38-39. 



ORGANIZATION OF THE AGRICULTURAL ENTERPRISE 361 

manent help. A reasonable amount of such work is beneficial to 
health, and it is rare indeed for a farm boy to be harmed by the work 
he is called upon to do. This is in contrast to industrial employments, 
where the conditions of work are unsuited to children, so that higher- 
priced adult workers must be used. Children on a farm learn to take 
life and work seriously. They have the best form of apprenticeship 
by working with their parents. And the work they can do when 
quite young, even though light and intermittent, fits into the whole 
scheme of the enterprise in such ways as to add very considerably to 
the product. This is one of the reasons why farming does not lend 
itself to consolidation, such as readily takes place in manufacturing. 

The factory system is based on high-priced supervision. Most 
of the workers have only a few things to learn, and they are under 
close supervision. It is impossible to give close supervision to large 
farming enterprises because the workers are so scattered. For general 
farming, 40 to 80 acres of crops can be raised per worker. The num- 
ber of men that might be gathered under one roof under the super- 
vision of one superintendent would in farming be scattered over half 
a county. 

For nearly ail farm operations it is necessary that each worker 
be intelligent and that he take an interest in the work. We cannot 
have a boss watching the man on a mowing machine. If someone 
has to watch the driver, he may as well replace the driver and do the 
work himself. There are a few operations at which gangs of men can 
be used, but there are very few cases in which a farmer can make a 
continued use of a gang of men. It is very difficult to get men to take 
the necessary interest in large farms. If wages are high enough to 
attract men who will take an interest without close supervision, the 
high wages take all the profit. 

A profit of 10 to 20 per cent on the wages of each worker is a good 
profit in any industry. If the industry employs a very few men, the 
profits will be small. 

The expense of hauling crops and manure usually makes about 
600 acres the limit to run from one center. But for general farming 
this area with half the land in pasture is a business that, measured 
in workers, corresponds with a grocery store that employs two or 
three clerks and one or two delivery-men. 

The prices of farm products are based on production by the farm 
family working as a unit. The hired help is usually boarded in the 
family at much less than it costs to hire it boarded. The women wash 



362 AGRICULTURAL ECONOMICS 

the milk pails, care for the chickens, go to town on errands. They 
very frequently take the place of a man at these light operations, and 
also very frequently help with farm work. In Delaware County, on 
210 of the rather large dairy farms, 20 per cent of the milking and 
caring for cows was done by women and children. On the smaller 
farms, the proportion of such labor is much more. All this labor is 
directly interested. When men are hired to run large farms, it is 
exceedingly difficult to produce farm products at the same cost at 
which they are produced by the family-farm system. 

More conclusive than the reasons for failure are the results. 
Literally hundreds of successful business men scattered from the 
Atlantic to the Pacific have tried running large farms with hired 
managers. Most of these men have demonstrated their ability to 
make money in cities. The writer has seen many such farms in a 
number of states, but has not yet seen a case in which a man who made 
a fortune in a city has ever added to his accumulations by running a 
large farm with a hired manager. There are many cases in which 
the live stock has taken premiums innumerable and the crop yields 
have been all that could be desired, but the profits have always been 
book profits. No farm is a success that does not pay all expenses, a 
reasonable rate of interest, and good wages to the operator, and have 
enough money to provide for depreciation. Many college graduates 
have undertaken the management of such farms. Formerly the 
writer recommended some of them for such places, but so far the writer 
has never seen an instance when such a farm paid. Yet these same 
college graduates have by the hundreds demonstrated their ability to 
make their own farms pay. Part of the difficulty is the erroneous 
attempt to apply the factory system to farming operations. 

117. THE DEMAND FOR INDUSTRIAL ORGANIZATION IN 
AGRICULTURE 1 

By ROY HINMAN HOLMES 

The very evident desire of so many country people, both young 
and middle-aged, to get away from the farms, coupled with the impos- 
sibility of an influx from without to fill the places of those who leave, 
indicates clearly that the system of farming, as we know it, cannot 
indefinitely continue. At the present time so many of the farmer 
families have left the land that in many localities those who remain 

1 Adapted from "The Passing of the Farmer," Atlantic Monthly, CX, 517-23. 



ORGANIZATION OF THE AGRICULTURAL ENTERPRISE 363 

are tilling such large areas that the work cannot be other than super- 
ficially done. 

In the old days, the neighborhood group was very often entirely 
self-sufficient. It was the natural thing for the farmer who had more 
sons than could profitably be employed upon the home acres to allow 
one or more of the boys to spend a portion of the year in the employ of 
neighbors who were without sons. Though/it was an economic mis- 
fortune to be without strong and willing boys in the home, yet one 
could usually depend upon hiring neighbor boys for just the length 
of time that help was needed. 

The multiplication of radiating influences from the rapidly 
developing modern city has swept away the old days. The growing 
sons and daughters are spending more and more time in the schools. 
The well-to-do farmer very naturally wishes his children to enjoy as 
good educational advantages as the children of the town merchant. 
His own children gone, he calls in vain now for the assistance of the 
young people of the neighborhood. They, too, are at school, or, if 
at work, are in the shops and stores of the city. The old group is 
broken, and help, if it comes, must come from without. Efficient 
single men and women for farm labor may seldom be found today at 
any wage, and the supply of inefficient laborers is becoming con- 
tinually less. 

There seems to be no lack of capable married men who are glad 
to work on the farms for pay equivalent to their city wage. They 
must be made certain, however, of work for the entire year, and their 
pay must include the rent of suitable dwelling houses. The farmer 
of today, as a rule, is not in a position to take advantage of this source 
of labor supply: Hence, his fields are imperfectly tilled and his 
crops improperly harvested. 

The merchant has no difficulty in obtaining workers. For him, 
the "Help Wanted" sign brings scores of applicants. The manufac- 
turer often has a " waiting list" to choose from. That these men may 
hire while the farmer may not is a social discrimination against the 
occupation of farming that cannot long be withstood. 

Undoubtedly the primary fault in the occupation, the one funda- 
mental thing which is rendering the present system of farming the 
least popular calling in the modern scheme of things, is its lack of 
opportunity for specialization in labor. In these days of the expert, 
the farmer is inexpert and therefore lonesome. In the cities, the men 
of every calling, from the surgeon to the chimney-sweep, pride 



364 AGRICULTURAL ECONOMICS 

themselves upon doing one thing well. The farmer alone is the 
jack-of-all-trades. Though the trend is toward specialized lines of 
production, the farmer's labor remains, as it was in the beginning, 
unspecialized as to processes. With the coming of more complicated 
agricultural machinery to be handled, and the growing necessity for 
thorough study of soils, of insect pests, and of the markets, the 
farmer is yearly brought face to face with more complex demands. 

To manage and do the major part of the labor, satisfactorily, on a 
farm of eighty acres, demands on the part of the farmer several lines 
of proficiency which are seldom found combined in any one individual. 
He must have the strength and physical endurance of the unskilled 
laborer, combined with the ingenuity and mechanical ability of the 
skilled workman. He must be somewhat of a student, an authority 
on matters connected with the science of agriculture. As a student, 
he must also have something of the spirit of the investigator and 
experimenter, for his own farm presents problems for which he can 
find no solution in the books. He must be a business man competent 
to manage a large and complicated undertaking, or much of his labor 
will be wasted. The typical farmer, in his attempt to make a credit- 
able showing upon each of these counts, attains no better than second- 
rate efficiency in any single line. Comparisons with the city expert 
are bound to make him uncomfortable. However, such comparisons, 
although unjust to the individual, are yet inevitable. It is told to all 
that he is a poor business man, a superficial student, a bungling 
mechanic, and a clumsy laborer. He is made to feel that he is a 
misfit on the land and in the work of his inheritance. He is rather 
severely punished for marching in the rearguard of a vanishing 
procession. 

The pioneer days are over. The present call of the land is not 
unlike the call to other activities. It is to men who have money to 
invest, and to those who have expert knowledge and ability of some 
sort. As the farming class was called into being by the existence of 
abnormal land conditions, it is very natural to expect that as con- 
ditions become normal the class will be merged back into the society 
from which it sprang, and the task of agricultural production taken 
over by the classes of modern industrial organization — by the capi- 
talist, the manager, and the laborer. The laws of social and economic 
development which brought the factory are in operation still. Agri- 
culture is but a form of manufacture, and its development must be 
along the lines marked out by the development of manufacturing in 






ORGANIZATION OF THE AGRICULTURAL ENTERPRISE 365 

the past. The little shop in which the owner and his family lived 
and performed all the labor, both mental and physical, connected 
with the manufacture of wagons or shoes has given way to the great 
plant employing thousands of specialists. The small farm of today 
is similar in its organization to the shop of yesterday, and must as 
surely give way. 

The farmer does not leave the farm because it is in the country. 
He turns away from it for the same reason that the cobbler turns from 
the shop — because he feels it to be out of harmony with the life about 
him. The real "isolation," which we are to understand is the prime 
reason for the unrest of the farmer, is not physical, it is social. It does 
not consist in the fact that his nearest neighbor lives a quarter of a 
mile or more away, but rather in the fact that he is a farmer: his 
occupation and necessary mode of life do not fit well in the modern 
scheme. If physical isolation were the cause of the discontent, 
modern improvements in methods of communication would do much 
to bring contentment. It is noticeable, however, that in those com- 
munities best provided with modern conveniences the drift cityward 
is most rapid. The more closely men are drawn together, the more 
surely does the old order pass. 

Though the pioneer's work was well done, it is now finished. 
There is no especial reason to look for the expert agriculturist of the 
future among the descendants of the pioneer farmer of the past. The 
men who are to carry on the agricultural production in the coming 
days are being prepared in the cities for their task. As the new 
civilization is urban, so the new farming is of necessity a specialized 
department of urban life. There cannot long remain the distinction 
implied in the terms "townsman" and "countryman." All men will 
be grouped in the tables according to occupational divisions. The 
question will be not, " Where does one live ? " but rather, " What does 
one do?" Country work will be as well subdivided as the work of 
the cities, and for the most part according to the same divisions. The 
agricultural expert will direct the labor in the fields as do other experts 
the various processes in the great shops. Agricultural production will 
have come into its own. 

One of the greatest social advantages which we may hope to 
derive from the change is a vastly increased opportunity for laborers 
now crowded into the cities to find work in the country fields. One 
would expect to see a continual shifting of the laborers of the poorer 
classes back and forth between the town and the country. The more 



366 AGRICULTURAL ECONOMICS 

of these people who can be brought into diiect contact with the soil, 
the better. America has in the past looked to the farm for the 
rejuvenation of her social vitality. The land will probably much 
better serve social needs under the new system than under the old, 
for the healing influences of the soil will be applied directly to those 
of our people who stand most in need of healing. It is not the few 
who can afford to own farms who most need the benefits of country 
life, but rather the many who can neither buy nor rent. Under the 
new order they and their children will receive a blessing which might 
never come to them in the old, and the whole of society will be bene- 
fited thereby. 

118. THE NEED OF A LARGER UNIT OF ORGANIZATION 1 
By O. F. COOK 

The American cotton industry presents unusual opportunities for 
improvement through community organization. Many important 
advantages are not to be realized by individual farmers working alone, 
but require the united action of entire cotton-growing communities. 
Only in this way can improved varieties and other results of scientific 
investigation be effectively utilized. The present unorganized condi- 
tion of such communities limits the power of the individual farmer 
to improve his crop. Organizations of southern corn growers are 
learning some of the advantages of co-operation in the improvement of 
a crop, but other and still greater advantages are to be gained with 
cotton by organized effort on a community basis. 

A right choice of methods is as necessary in applying the results 
of scientific study as in conducting investigations. Methods of 
improvement well suited to other crops are entirely inadequate with 
cotton. The crossing of varieties in the field and the mixing of seed 
in gins render it unusually difficult to preserve the uniformity of 
superior varieties. Uniformity is more important with cotton than 
with corn, because the fiber is used for manufacturing purposes. 
Selection is more difficult with cotton but has a double value, for 
uniformity not only increases the yield but adds to the commercial 
value of cotton. 

Two things are necessary for any adequate application of the 
results of scientific investigation to the cotton industry: (i) the 
superior varieties that are bred must go into general use, and (2) their 

1 Adapted from Yearbook of the Department of Agriculture, 191 1, pp. 397-407. 



ORGANIZATION OF THE AGRICULTURAL ENTERPRISE 367 

uniformity must be maintained by continued selection. Experience 
has shown that neither of these objects is likely to be attained by the 
miscellaneous distribution of small quantities of seed. Such distri- 
bution serves to introduce a variety to the farmer's attention, but 
this is only the first step toward effective utilization. Unless new 
varieties are adopted by whole communities instead of by scattered 
individual farmers, there is no prospect that their full value will be 
realized or that their uniformity will be maintained. These objects 
would be much easier to secure if each neighborhood or group of 
farmers who grow their cotton in adjacent fields and carry it to the 
same gins could act together as communities. The community should 
agree, if possible, upon the planting of one kind of cotton and take 
measures for maintaining the purity and uniformity of the stock by 
continued selection under the local conditions. This would mean 
larger crops, better fiber, and higher prices, not only because of the 
improved quality but because each community would be able to pro- 
duce a commercial quantity, a hundred bales or upward, of the same 
uniform type of cotton. 

If the skill and discrimination now used in buying and selling cot- 
ton could be applied to raising it, the product would be greatly 
improved. Community organization would aid in bringing this about 
by enabling the farmer to acquire special knowledge like that used 
by the buyer in separating and grading the different kinds of 
cotton. 

Manufacturers have no use for miscellaneous small lots of cotton, 
like those produced in unorganized communities where each farmer 
is likely to plant a different variety and follow a different method of 
culture. The commercial selection and assembling of commercial 
quantities of the different grades and qualities of cotton, as carried 
out by the buyers, is a necessary part of the present system, and is to 
be avoided only in communities that devote themselves to the pro- 
duction of a uniform type of cotton. Many dealers refuse to con- 
sider the essential qualities of length and strength of fiber in buying 
the cotton from the farmer. A farmer who takes the trouble to raise 
a crop of superior fiber and is then refused a premium can hardly be 
expected to repeat the effort. He is more likely to apply to the 
Department of Agriculture for a variety that will produce the most 
pounds of lint without regard to quality. At the same time come 
requests from manufacturers that the planting of long-staple cotton 
be more actively fostered. These conflicting demands show that the 



368 AGRICULTURAL ECONOMICS 

present system is not advancing the true interests of either the pro- 
ducer or the manufacturer, to say nothing of the ultimate consumer. 

The fundamental agricultural advantage to be gained by com- 
munity organization is the production of uniform crops of cotton. 
The cotton industry will show little improvement from the breeding 
and distribution of superior varieties until better provision is made 
for preserving the uniformity of select strains. Superior varieties are 
of practical value only to the extent that they are preserved and 
utilized for purposes of production. No matter how desirable in 
other respects, a variety of cotton cannot be considered superior unless 
it is kept uniform, nor can any variety be expected to remain uniform 
unless selection be continued and admixture with other varieties be 
prevented. 

In addition to gaining familiarity with improved varieties and 
methods of selection, many other improvements could well be studied 
by organizations of cotton growers. Cultural methods that appeared 
satisfactory before the arrival of the boll weevil have become entirely 
inadequate for the production of crops in the presence of that destruc- 
tive insect. Local conditions of soil, climate, labor supply, and rela- 
tion to other crops differ so much that each locality is likely to require 
a cultural system of its own if the best results are to be secured. A 
co-operative study of cultural problems by cotton growers' associations 
would be a factor in local progress, for the community would profit 
more promptly by the efforts of those who have the taste, ability, and 
judgment to experiment with different methods and draw correct 
conclusions. 

119. ORGANIZING THE COMMUNITY FOR PRODUCTION 1 
By T. N. CARVER 

Our plan for the organization of a rural community begins with 
the committee on production. The greater part of the actual work 
of production can probably be carried on most economically on indi- 
vidual farms of a size which can be cultivated mainly by the labor 
of one family. This calls for very little co-operation or organization. 
But the study of the problems of production can undoubtedly be 
carried on most effectively in co-operation. If a hundred men in a 
community are all studying the problem of growing the crops of that 
community, but each man studies alone and does not exchange ideas 

1 Adapted from Yearbook of the Department of Agriculture, 1914, pp. 97-101. 



ORGANIZATION OF THE AGRICULTURAL ENTERPRISE 369 

with his neighbors, each man profits only by his own study; but if 
they meet frequently to discuss their common problems and to 
exchange ideas, each man profits, not only by his own study, but by 
that of all his neighbors. Again, much of the work of organized 
marketing must begin before there is anything to sell. It must begin 
with production. Successful marketing consists, first, in finding out 
just what the consumers want and how they want it packed and 
delivered. To get the whole community to grow a uniform product 
such as the consumers demand requires organization of the commu- 
nity to standardize its production. Again, to stimulate rivalry in 
improving the products of a community, both as to quality and 
quantity, requires an organization to recognize and show some appre- 
ciation of merit. 

This committee should also study to discover new methods of 
increasing the productivity of the community, new crops, new and 
improved methods of soil treatment, the field selection of seed, scien- 
tific breeding of live stock, and even the conservation of manure. 
Too much emphasis can hardly be laid on the importance of organized 
promotion of breeding enterprises. So long as this is left wholly to 
individual breeders, each one working alone, no great headway can 
be made by small farmers with little capital. We have depended 
wholly upon importation from abroad, and, in spite of the millions 
of dollars which have been expended for imported breeding stock, there 
is probably no European country which has so much poor stock as 
the United States, and there are not many where the average is 
so low. 

One reason for our indifferent success in animal breeding has been 
the lack of neighborhood organization. Where a whole community 
is interested in the same breed of live stock, where practically every 
farm is a breeding station, there is, first, a wider basis of selection 
than where only one farm is given over to that breed. A wider basis 
of selection makes possible more scientific mating than is possible 
where there are only a few breeding animals from which to select. In 
the second place, a neighborhood enterprise of this kind gives greater 
permanency and continuity than is possible where only a few indi- 
vidual farmers are interested. It has happened so often in this 
country that it may almost be said to be the rule that by the time a 
successful breeder has built up a superior herd, stud, or flock his life 
is drawing to a close, his sons have moved to town, and his animals 
are scattered. If, on the other hand, the whole community in which 



370 AGRICULTURAL ECONOMICS 

such a breeder lived were engaged in developing the same breed 
instead of a large number of different breeds, his animals would prob- 
ably remain in the same neighborhood and be crossed with others of 
the same breed. When this happens the work of the individual 
breeder is not lost, but is enabled to count in the improvement of the 
stock of the country. Under our present highly individualistic 
methods, the farmer who enters upon a breeding enterprise frequently, 
if not generally, makes the initial mistake of selecting some breed 
which is new to his community in order that he may have something 
different from anything possessed by his neighbors. It is safe to say 
that a neighborhood whose farmers behave in this absurd manner will 
never become distinguished for the excellence of its live stock or of 
its field crops. 

120. THE POSSIBILITIES OF CO-OPERATION 

In order to understand the gains which may be expected from 
co-operative organization of agriculture, we should have clearly in 
mind the shortcomings of the individual type of organization as 
exemplified by the family-farm, and examine the precise way in which' 
co-operation is supposed to remedy these defects. It is quite evident 
that the farm of comparatively small size is bound to remain the most 
efficient operating unit under any type of agriculture which we can 
foresee. The personal interest of the farmer and the suitability of the 
family labor group do not, however, mean that such organization 
secures the most effective possible utilization of the labor factor in 
production. Though well suited to the routine operation of the farm, 
it does not secure what is demanded by modern scientific methods of 
agriculture, in the way of specialized forms of labor ability. The 
average farm needs a little engineering work, a little veterinary 
science, a little scientific plant and animal breeding, tree pruning, 
special business ability and training, or what not. Even if the farmer 
be the graduate of an agricultural college, he cannot expect to become 
as expert in any one of these lines as can the man who makes it his 
profession. Some, but not all, of these kinds of specialists can be 
hired by the farmer when he needs them, but, in practice, he fails to 
get their services adequately organized into his enterprise. The large 
corporation solves its labor problems of this sort by decentralizing 
operation among such number of plants as are needed for technical 
efficiency and centralizing specialized services so as to keep such 
workers fully employed. Theoretically, there is no reason why co- 



ORGANIZATION OF THE AGRICULTURAL ENTERPRISE 371 

operation cannot effect a like efficiency in the organization of the 
labor factor in agricultural production. The co-operative cow- testing 
association may employ a trained animal husbandman to supervise the 
operations of all its members; the co-operative fruit associations may 
secure special labor in pruning, spraying, packing, and selling. The 
essential difference between the incorporated and the co-operative 
form of association in this regard is that in the former authority goes 
with the supervisory worker, whereas in the latter he is too often 
only in an advisory position. This question of control we shall 
return to later. 

The second weakness of individual enterprise in agriculture con- 
cerns the capital factor. Since agriculture has passed into the 
capitalistic stage, economy in equipment on the one hand and operat- 
ing efficiency on the other have become the two conflicting goals 
which the farmer is trying to reach. The family-farm has too much 
invested in capital-goods for profit and too little for full efficiency. 
Can co-operation solve this difficulty ? Evidently it cannot do so by 
consolidating the operating units into monster plants similar to our 
great industrial establishments. But it can organize together groups 
of the existing small units, so as to give larger employment to an 
expensive piece of machinery, or to secure full utilization of a costly 
breeding animal, or build a community packing-shed and equip it 
with appliances that would be utterly out of the question on a single 
farm. Here again we meet with the administrative problem. It is 
in many cases impossible to give the same service to all. The cor- 
poration can guide its actions by considerations of largest total profit, 
no matter from which of its plants or departments it may be derived. 
The co-operative association cannot thus wave aside personal con- 
siderations, but is constantly confronted by nice questions of justice 
and equality among its members. 1 

But these considerations of faulty organization of the labor and 
capital factors in agriculture, and the benefits possible through co- 
operation, sink into minor importance as compared with the problem 
of directive and administrative efficiency — the function of entre- 
preneurship. The conspicuous successes of consolidated industrial 

1 Undoubtedly, the mere fact of size, which comes of pooling their business 
interests, gives to the co-operative group numerous commercial advantages. 
Through its improved bargaining position it can sell products, buy supplies, hire 
labor, and borrow funds on better terms, ship at lower rates, and secure better 
service than as individuals. 



372 AGRICULTURAL ECONOMICS 

enterprises have been due in large measure to the selective develop- 
ment of a class of business directors, promoters, and organizers, and 
the putting of the control of enormous units of our productive resources 
into their hands. It is such captains of industry who decide upon 
aggressive development in this direction, complete or partial with- 
drawal from that field, and the marshaling of men and money to a 
wholly new line of production elsewhere. The gathering of executive 
authority into the hands of a small group of persons of specialized 
abilities has made possible decisive action, a thing frequently 
necessary in order to take advantage of opportunity or to avoid loss. 

Now the question forces itself forward: How far does co-operation 
consolidate such entrepreneur functions in the hands of those able to 
exercise them wisely? Clearly it does not give imperial control to 
a few lords of industry, who can then exploit their fellows, as the cor- 
poration sometimes does, no doubt. Does it, on the other hand, 
leave all policies to be determined on a " one-man-one- vote" principle, 
that leaves it on its former plane of inefficiency ? Or does it delegate 
power for immediate action to men chosen because of demonstrated 
fitness, and responsible to those affairs they direct? Undoubtedly 
many of our successful co-operative associations are thus intrusting 
their selling policies to keen and well-trained salesmen, and to a 
limited extent are putting parts of their producing operations under 
similar control. It is worth while, however, to pause and ponder how 
fully and in what manner co-operation offers a better solution to the 
problem of business entrepreneur ship. 

We should realize, too, that to quite an extent we are tending to 
keep the old type of unorganized operating units, while we concen- 
trate both specialized abilities and administrative wisdom in public 
bureaus — the United States Department of Agriculture, the agricul- 
tural colleges of the various states, the experiment stations, state 
commissioners or boards of agriculture, county demonstration agents, 
and the like. This is not socialism, since there is neither government 
ownership nor operation. It might be called " individual enterprise 
under government patronage," and apparently presents opportunities 
for tremendously effective organization of some parts of our agricul- 
tural resources, through pooling of interests and efforts on the largest 
scale. 

The economic bearing of these facts has not as yet been carefully 
studied or discussed. Indeed, the process itself is still in the early 
stages of hardly conscious evolution. But it seems possible that it is 






ORGANIZATION OF THE AGRICULTURAL ENTERPRISE 373 

the most potent single force at work upon our agricultural system 
today. 1 However that may be, we must keep clearly in mind the 
fact that the goal of any kind of business organization is to make the 
most effective co-ordination of natural resources, accumulated wealth, 
and human powers of all sorts — physical, mental, and spiritual — ■ 
toward the end of creating the maximum product from the land. 
This test must be applied to all, from the humblest individual farmer 
to the state itself. 

1 Besides its effect upon economy and efficiency of production, it may prove 
to have an important bearing upon the distribution of incomes derived from 
agriculture. If it be true that most large accumulations of wealth have come as 
a reward to shrewd entrepreneurship — which means the exploitation of a natural 
monopoly — may not this socialization of entrepreneurship go farther than any- 
thing else could to maintain a truly democratic type of organization in agriculture ? 



V 



VII 

RECORDS AND ACCOUNTS AS MEASURES OF 
EFFICIENT MANAGEMENT 

Introduction 

The preceding chapter has had much to say concerning the work 
of the organizer in directing the farm enterprise into profitable 
channels. It is evident, however, that if he is to find and follow the 
pathway of economic efficiency he must not rely upon his current 
impression of what he is accomplishing, but must employ some definite 
means of measuring his farm operations and keeping a quantitative 
record of results. 

This does not mean that we should open up a complete set of books 
and establish an accountant on every farm. Accounts are merely a 
means to a particular end and should be the simplest means of securing 
certain facts for the farmer. It is a mistake to suppose that all these 
facts need to be reduced to dollars. The bank's records are in that 
form because the bank's operations are all financial in character. 
The merchant's accounts are quite similar. Many a farmer makes 
hardly more cash sales in a year than the ordinary merchant does in an 
hour. His whole year's business may be covered by the twelve 
checks he receives from the creamery or an even smaller number of 
remittances for stock shipped. If his family does all the work on the 
farm and he settles his store bill quarterly, he can probably carry all 
the figures of his money transactions in his head. 

To set these figures down in a careful set of double-entry accounts 
would, of course, guard against errors and have a certain value. But 
much more important for the success of his future operations would 
be a record of the quantity and quality of milk produced by each 
individual member of his dairy herd, or of the number of hours of 
productive labor of each horse, the work record of each man hired, 
and the amount of feed secured from various fields planted to the 
different crops. The farmer very likely knows what income he 
derived from his farm; what he needs to find out is which animals 
or which fields contributed to that profit and in what proportion. 

374 






RECORDS AND ACCOUNTS 375 

Such records, however, tell only a part of the story. If the farmer 
has any money invested in the farm enterprise, his cash income may 
not give a correct report of the results of the year's operations. The 
value of his capital may have increased or decreased as a result of 
the growth of his farm property or its depreciation through use. 
Only by making an inventory at regular intervals can such profits and 
losses be adequately recorded. If real estate be included in this 
inventory, however, a danger appears. Increase in the value of the 
farm may cause it to show an apparent profit, whereas there has been 
an actual loss in operation. Ordinarily this danger is only for the 
man who is willing to deceive himself, but if the increase in value is 
due to the increase in productivity of the soil as the result of better 
farming, there could hardly be objection to including it as a true gain 
from operation. Particularly, if the farm practice has subordinated 
cash returns to this building-up process, such improved fertility must 
be reflected in a higher valuation, or the accounts will fail to tell a 
true story. Finally, the inventory serves to determine the amount of 
the gross income which shall be credited to labor, by setting the 
amount upon which interest must be first allowed. 

Section C shows two simple systems for bringing together such 
financial records as will enable the farmer to ascertain the amount of 
income, whether in form of cash or capital, which has resulted from 
the year's operations, and also to indicate the distribution of that 
income between the labor and the capital which have co-operated to 
produce it. Here again we find opportunities to apply the compara- 
tive method of studying the efficiency of the farm business without 
resort to the more complicated methods of cost accounting. We have 
already spoken of the possibilities of comparing the performance of 
different productive units, even if not reduced to a financial basis. In 
selections 128 and 129 we see two possible ways of detecting the strong 
and weak points of management by comparing with conspicuously 
successful farmers or with what have been worked out as normal 
standards. 

In section E, Professor Taylor has admirably pointed out the appli- 
cation of cost-accounting methods to the study of the organizer's 
problems. There are two questions which properly emerge from any 
scrutiny of cost-accounting data. The first is, "Can costs of produc- 
tion be lowered ?" The cost accounts show, not only what the product 
cost, but also the elements which went into that total. A careful 
study will serve to reveal leaks in the use of man labor or horse labor, 



376 AGRICULTURAL ECONOMICS 

or will show where fertilizer expense was ill advised or where other 
wastes occurred. After all such defects in management which can be 
remedied have been attended to, the question arises, "Can some other 
crop be substituted for this one and result in greater profit ? " Often 
crops which make a large gross return are found upon examination of 
their cost accounts to net a smaller profit than others which appear 
to be less desirable. 

The mere making of such records as we have been discussing 
causes the farmer to get a new and helpful point of view. He gets 
outside the routine of daily work and looks at the enterprise from the 
position of the entrepreneur instead of that of the laborer. From day 
to day his mind is so filled with the practical details of operation that 
he often loses sight of the larger economic bearings of his work. 
Pride in the appearance of his farm may cause him to forget the 
financial aspects of the process by which that rustic beauty is secured. 
Love of animals may result in his ignoring the fact that he is keeping 
some very expensive pets. The enjoyment he gets out of running 
power machinery may blind him to the high cost of owning certain 
farm equipment which might be dispensed with. The account book 
plays no favorites. Likewise the keeping of accounts involves a 
process of analysis which results in the discovery and appraisal of 
items which the farmer has been all too prone to overlook. Such are 
the depreciation of property values, the marketable value of unpaid 
labor, and the interest-earning capacity of invested capital. Not 
until he sees the nature of these values can the farmer be expected to 
take them into his reckoning. The study and interpretation of his 
records and accounts is the beginning of wisdom for the farm entre- 
preneur — who determines the ultimate character and direction of 
agricultural enterprise. 

However, we must not stand up so straight that we bend back- 
ward; we must not charge values that do not exist. The general rule 
for farm cost accounting is to charge both labor and materials at 
market value. But often things which are not marketable are so 
charged, and the result is misleading and sometimes absurd. For 
instance, if stock are raised on feed that would otherwise go to waste 
and are cared for in time that would otherwise not be profitably 
employed, charging these at the market rate for salable feed and 
employed labor gives an apparent loss on a venture which was unques- 
tionably profitable. The cows that are herded along the roadside by 



RECORDS AND ACCOUNTS 377 

a ten-year-old boy can hardly stand a labor charge of ten cents an 
hour. Neither can the colt that the boy raises be so charged for time, 
nor for what feed it picks up at the straw stack, at the town price of 
straw less the cost of baling and hauling. Caution as well as zeal 
should go into the making of cost accounts. 

Probably the greatest source of error and confusion in our farm 
accounts is to be found in the fact that the farm business and the farm 
home are not separate. This results frequently in the burdening of 
the former with expenses which properly belong with the latter. 
There is the residence, which is often used for storage of the products, 
quarters for the hired help, and even as a workshop where butter is 
manufactured, chickens are hatched, seeds tested, and so forth. One 
or two driving-horses are kept largely for family use, but they are also 
used to go to town on errands and for light work in the fields. Any- 
one can add to this list of overlapping uses, but the point is that when 
the year is done and the profits and expenses are checked up on the 
books, it should not be forgotten that the farm family has already 
consumed a large amount of what the farm has produced during the 
year. It is no easy matter to charge this all on the books. How 
much, for instance, shall the family pay for its drive to church in the 
carriage which is exclusively a pleasure vehicle, and behind the team 
which is used steadily for work purposes ? No doubt such difficulties 
can be worked out in any individual case by common-sense rules 
which are not too complicated to apply. But also, no doubt, many 
of the figures which have been given to the public in the past con- 
cerning farmers' incomes and costs of production have failed to make 
just such allowances. 



A. Production Records 

121. INDIVIDUAL PERFORMANCE OF DAIRY COWS 1 
By CLARENCE B. LANE 

The condition of the farm industry as seen on the average farm 
points to the need of better business methods and more definite 
knowledge of the sources of profit or loss. In no department con- 
nected with the farm is there more need for absolute data than in the 

1 Adapted from Bulletin 75, Bureau of Animal Industry, United States Depart- 
ment of Agriculture, pp. 9-14, 45, 49. 



378 AGRICULTURAL ECONOMICS 

dairy. The records of progressive and unprogressive dairymen indi- 
cate that there is no business which shows a greater range of profit 
than that of dairy farming. Investigations of creamery patrons illus- 
trate this most strikingly and show that one dairyman frequently 
makes double the profits of his neighbors. In an investigation of the 
records of ioo creamery patrons, conducted by Hoard' 's Dairyman, it 
was shown that one of them made $2 . 30 for every dollar invested in 
feed for his cows, while a neighbor made $1.00 and another but 
50 cents. All had the same soil and the same market. Thirty-eight 
out of the hundred kept cows at an actual loss. 

This bulletin aims to show dairymen the importance of keeping 
records complete enough to give the dairy performance of every cow 
in the herd, thereby making it possible to weed out the unprofitable 
animals. With the application of the scales and the Babcock test 
this can be done, and both production and profits greatly increased. 
A record is also of great help to the feeder. If he knows exactly what 
a cow is doing he can prepare the ration accordingly, and often feed 
more economically. Records at the Michigan Experiment Station 
showed that the profit on the milk from different cows varied from 
$6.08 to $94.05. 

Experience has shown that, while farmers know in a general way 
which are the good milkers in their herds, they are likely to be seriously 
mistaken in many cases unless actual records are kept. For example, 
a well-known dairyman and his two sons prepared a list of what they 
considered their best half-dozen cows. He had handled every one of 
these cows from its birth and he and his sons did the milking. After 
keeping actual records for a year, he found the cow they had put first 
on their list stood fourth and the one they had put in fifth place stood 
first. In second place came a cow he had not had on his merit list at 
all; the third was his fourth; the fourth, his first; fifth, his sixth; 
and sixth another not on his merit list. His second and third were 
still lower down the list as actual performers. 

Accurate and continuous records are necessary for best results. 
While daily records are best, various investigators have recommended 
methods of estimating the yearly production from a few weighings 
and tests, a number of which methods have proved practical and 
reasonably accurate. For example: The Wisconsin Experiment 
Station recommends weighing and sampling the milk one day each 
week during the year; and the Illinois station suggests weighing and 



RECORDS AND ACCOUNTS 



379 



sampling each cow's milk for fourteen consecutive milkings every 
seventh week. Two types of record are illustrated below. 

YIELD OF MILK JULY 30, P.M., TO AUGUST 6, A.M. 



Number of 
Milking 

I 

2 

3-- 

4 

5 

6 

7 

8 

9 

10. . 

11 : . . . . 

12 

13 

14 

Total.... 
Fat — per cent 
Fat — pounds . 



Spotty 



Black 
No. 1 



Black 
No. 2 



Bottle 



Milly 



Little 
Lamie 



Alice 



20.5 
13-5 



22.0 
14.O 
19.9 

14-5 
22.6 

15-4 



250.3 
3-2 
8.00 



14. 1 

6.8 

16.8 

5-2 

157 
7.0 

*5-5 
7-8 

145 
9-5 
9.8 

13.0 

13.2 
7-1 



"■3 
6-5 

11. 7 
8.2 
6.0 
9.2 
4-7 
7-3 

13-5 
6.9 
4.0 
6.8 
6.7 



15 
10 

15 
10 

!3 

11 

14 

11 

16.4 

io-5 

12.9 

"5 
16. 1 

"•3 



156.0 
2.8 
436 



in. 6 
3-2 
3-57 



180.5 
35 
6.31 



221 
3 
7 



10.9 

8-3 
11. o 

8-5 
10.7 

9-5 
9.6 



135-5 
3-4 
4.60 



7 
4.4 
8.6 
43 



83.6 
4.6 
384 



ONE COW'S RECORD AT SEVEN-WEEK INTERVALS 



Week Ending 


Milk 
Pounds 


Fat 
Per Cent 


Fat 
Pounds 


Butter 
Pounds 


March 31 

May 19 

July 7 


192.4 
142.4 

84.3 
7.0 


3-2 

4-3 

. 4-0 

6.9 


6.16 
6.12 

3 37 

.48 


7.18 

7.14 

3-93 

.56 


August 25 



122. CHECKING UP THE POULTRY PLANT 1 
By G. M. GOWELL 

It was found in practice that, with the most careful selection, we 
were including in our breeding pens birds that were not great pro- 
ducers, and that it was a prime necessity to ascertain the exact record 

1 Adapted from Annual Report of the Maine Agricultural Experiment Station, 
1900, pp. 97-99; 1903, p. 70. It is true that the breeding experiments based 
upon this method did not have the results expected. But whatever the final 
conclusion of that controversy, the value of records of actual performance, as a 
basis of weeding out the unprofitable and continuing the profitable birds, cannot 
be doubted. — Editor. 



3 8o 



AGRICULTURAL ECONOMICS 



of the eggs produced by each individual. With the most careful 
selection we could make, when estimating the capacities for egg yield- 
ing by the type and forms of birds, we found we were still including 
hens that were small workers. Many of these light layers gave evi- 
dence of much vitality, and in many instances there were no marked 
differences in form and action by which we were able to account for 
the small amount of work performed by them. 

In 1898, therefore, a trap-nest was devised, by which we could 
secure a record of the actual performance of each bird. Only by the 
use of such nest boxes and records could we hope to control our work. 
Of 236 hens tested the first year, 39 laid 160 or more eggs and 35 laid 
less than 100 each. A sample of the record is shown below. 



Number of 
Hen 


Nov. 


Dec. 


Jan. 


Feb. 


Mar. 


Apr. 


May 


June 


July 


Aug. 


Sept. 


Oct. 


Nov. 


Dec. 


Total 


IOI 






18 

9 

19 

5 
3 


15 
23 
19 
12 


21 
23 
23 
20 


21 

19 
16 
21 


24 
16 
16 
22 


21 
21 

14 
22 

19 
4 


17 
19 
14 
18 

8 


26 
13 
17 
21 

6 


17 
15 
21 
18 


21 
8 


3 

20 




204 
20I 


36 




15 
11 


7 

ica 


19 


189 
160 


I 






41 




16 






52 
36 


234 




9 


17 




6 































Such records also show at what time of the year the eggs of any 
given hen were produced and, therefore, their relative value. It is 
apparent that the summer layer is not as valuable as the hen that 
produces a large share of her eggs when prices are high. 



123. 



B. Capital Accounts 

THE YOUNG FARMER'S NEED OF A YEARLY BUSINESS 
INVENTORY 1 



The young farmer who is endeavoring to build up a more efficient 
and profitable business seldom retains much cash. When money is 
received he buys a new implement, another animal, improves a 
building, or makes payments on bills for things bought on credit. 
During the course of the year he may receive and pay out large sums 
of money, leaving almost no cash at the end of the year. The annual 
returns may seem to have been only a fair living for himself and 
family, whereas the farm business may have turned a good profit, 

1 From Weekly News Letter to Crop Correspondents, United States Department 
of Agriculture, March 10, 1915. 



RECORDS AND ACCOUNTS 381 

which was invested from month to month. Hence it is important for 
the farmer's guidance and encouragement that he make an annual 
inventory of his farm investments. This inventory should be a 
detailed list, with values, of everything used in the farm business, 
including land, buildings, live stock, machinery and tools, produce for 
feed or sale, supplies, bills receivable, and cash; also a list of all 
accounts and bills owing. The difference between the total assets and 
debts shows the net farm worth. 

A study of two successive inventories of a farm in New York state 
illustrates how one young farmer on 100 acres prospered regardless of 
the fact that he had almost no cash at the end of the year. The total 
assets at the beginning of the year amounted to $13,090 and to 
$13,400 at the end of the same year, an increase of $310. The 
increased investment in live stock, machinery, and tools, and more 
produce held for sale amounted to $1,073, but this was partially offset 
by the cash decrease of $763. The farm indebtedness was also reduced 
by $253, thus making a total increase in net worth to the farm business 
of $563 . The inventory values covered all depreciations and increases 
in values, so that this $563 was net increase in the value of the farm 
investment. It means that this sum was saved from the year's busi- 
ness after all farm expenses had been paid, including interest on 
borrowed money and all living expenses. The amount of cash at the 
end of the year, $133, proved to be no indication of the success of the 
year's business. 

124. MAKING THE INVENTORY 1 
By FRED W. CARD 

The farm inventory should include all property, of whatever 
description, which the farmer may possess. A better record of the 
business situation can be obtained by keeping the inventory of the 
land itself separate from that of the* buildings and other improvements. 
In considering these improvements the point is quickly reached where 
it becomes a question what to consider as investment and what to 
look upon as an operating expense. Fencing is properly a farm 
expense, and under average running conditions may as well be so 
considered at once. Yet in taking hold of a run-down farm, where a 
heavy outlay for fencing may be needed all at once, a portion of the 

1 Adapted from Farm Management, pp. 150-56. (Copyright by Doubleday, 
Page & Co.) 



382 AGRICULTURAL ECONOMICS 

cost may well appear in the inventory, to be charged off gradually, 
thereby giving a more just account of the operations of each year. 

Orchards afford a puzzling problem. There can be no questioning 
the fact that a well-grown apple orchard adds materially to the value 
of a farm. The same applies to a peach orchard in much less degree, 
for the peach tree is short-lived and uncertain. Carrying the con- 
sideration down through the line of bush fruits, strawberries, etc., to 
a growing crop like a field of grass or winter rye, it is hard to draw the 
line where assets shall leave off and mere expense begin. Then, too, 
it is difficult to know what value to place upon a young, growing 
orchard. Probably the wisest plan is to add the yearly cost of care 
to the original cost of trees and planting. It is doubtless safer to 
take the conservative ground of treating all growing crops as an 
expense. It may be preferred to carry this even to the orchard, aim- 
ing to utilize the land as it grows in such a way as to pay the expense 
of care and management. This is surely better than an overvaluation, 
though not entirely fair to the farm, for a good orchard will add 
materially to its income-producing power and hence to its value. To 
place a value upon increased fertility and productiveness of soil is 
likewise a very difficult thing to do. A farmer may easily deceive 
himself by overestimating this factor. Yet while seemingly too 
intangible to rind a place in the inventory, it is one of the most impor- 
tant factors in the income-producing power of the farm. 

The farm dwelling offers a somewhat peculiar problem, since, 
except in so far as portions of it may be used for some farm operation, 
like dairy work, it is not a part of the farm business. The merchant 
or manufacturer does not think of including his home in his business 
inventory and asking the business to bear the interest and deprecia- 
tion upon it. The maintenance of his home is a personal expense, 
which may be heavy or light as he chooses, and which has nothing 
whatever to do with the conduct of his business. Whether the 
farmer lives in a house worth one thousand or ten thousand dollars 
need have nothing to do with the outcome of the farm business 
itself, but it will materially affect the showing if the expense of 
maintenance be charged to the farm improperly. 

Few farmers will care to keep two sets of books, one for personal 
accounts and one for farm accounts; yet both are important. Most 
men will prefer to separate personal expenses from farm expenses in 
the same set of books. It may, therefore, be desirable to include the 
dwelling in the inventory as well as all other forms of property which 



RECORDS AND ACCOUNTS 383 

the owner possesses, even though they may have no connection with 
the farm business. If repairs and other expenses connected with the 
dwelling are charged to the farm, an allowance for rental is likewise 
due if a proper showing is to be made. 

Notes, personal accounts, money in bank, and cash on hand are 
forms of property, which, strictly speaking, may not belong to the 
inventory, since they are neither stock nor equipment, but for the 
sake of simplicity it is well to include all assets, of whatever descrip- 
tion. 

Deducting the total liabilities from the total assets gives the "net 
worth." This is the important item to secure. A comparison of this 
net worth from year to year shows the financial outcome of the 
business. 

Fixing the inventory values is a matter of great importance, 
requiring good judgment and careful thought. Three general methods 
of estimating values present themselves. The implement may be 
inventoried at cost, at its selling value, or at its value for service. To 
value an article at cost is misleading. As time goes on the business 
becomes bolstered up with fictitious values which make it appear to 
have paid better than it really has. To inventory at the selling value 
of an article may be equally unfair. As soon as a tool is put to use 
its value for sale drops far out of proportion to its value for service. 
It is unfair to charge the farm with this large decrease, for the tool 
is not merchandise; it was not bought to be sold again. If it were 
worth the price paid it is still worth approximately the same amount, 
lessened by actual wear or injury, provided the cost of replacing it 
remains the same. Value for service is the chief factor in determining 
the inventory value, though neither the cost nor the selling value can 
be entirely disregarded. In determining this value several factors 
need to be considered. First among these is the probable length of 
service of the article. If it may reasonably be expected to last for 
ten years, under the conditions in which it is used, its value will 
decrease 10 per cent each year. However, if the service rendered in 
the tenth year of its use will be much less efficient than in the first 
year, its value at the beginning of that year is less than one-tenth of 
the original cost. 

Likewise the cost of replacing an article may be an important 
factor in determining value. It is manifestly unfair to place value 
on an article greater than the cost of replacing it. Also, the invention 
of a better tool for doing the work may destroy the value of a machine 



384 AGRICULTURAL ECONOMICS 

long before it is worn out. This is a frequent occurrence in manu- 
facturing life, but less common in agriculture. 

125. THE DEPRECIATION ACCOUNT 1 
By E. H. THOMPSON and H. M. DIXON 

In addition to the current farm expenses there are certain other 
items, such as depreciation, which may be called fixed charges. These 
occur on all farms to a greater or less extent. Buildings may be con- 
structed so that they will last for one hundred years, or they may have 
to be rebuilt every twenty-five or thirty years. The life of machinery 
depends on the care given and the extent to which it is used. Although 
there is no appreciable expense each year, these buildings and machines 
eventually have to be replaced. It is proper that a proportionate 
share of this replacement cost should be charged against the farm each 
year; otherwise, whenever a new barn or dwelling is built the entire 
cost of this building would have to be charged against the business for 
that particular year. Depreciation charges, therefore, are merely a 
method of uniformly distributing these costs over the period of years 
that they are in use. 

The annual depreciation on buildings will vary from less than 1 per 
cent on very substantial stone or brick buildings to as high as 3 or 4 
per cent on frame buildings. The rate of depreciation on machinery 
will vary from 5 to 20 per cent, depending on the implement and the 
way it is used. Probably from 7 to 12 per cent a year would be 
approximately correct for most farms. The amount of depreciation 
that should be charged each year as an expense is left to the judgment 
of the person making the record. No set rules can be given, as no 
two farms are exactly alike in this respect. 

C. Financial Records of the Farm as a Whole 

126. HOW THE OFFICE OF FARM MANAGEMENT ANALYZES 
THE FARM BUSINESS 2 

By E. H. THOMPSON and H. M. DIXON 

Experience shows that it is not possible to distinguish profit- 
able farms by casual observation. Where a farmer is operating a 
large business, even a low rate of interest without any wages for him- 

1 Adapted from Farmers' Bulletin 661, p. 6. See also selections 93 and 95, in 
chapter v. 

2 Adapted from Farmers 1 Bulletin 661, pp. i, 2, 9, 19-26. 



RECORDS AND ACCOUNTS 385 

self would bring in sufficient funds to give a prosperous appearance 
to the farm. But a farm cannot properly be called successful unless 
it pays a fair rate of interest on the investment, returns fair wages 
for the farmer's labor, and maintains at the same time the fertility of 
the soil. A better realization of the fact that the farm is a complex 
business subject to certain economic laws is one of the greatest 
benefits to be derived from such a study as is outlined in this 
bulletin. 

Farmers already know that the gain from a big business should be 
more than from a small one, that good cows are more profitable than 
poor ones, and that good crops are more desirable than those which 
do not pay for harvesting. The real difficulty is that the farmer has 
had no convenient way of measuring just how good or how poor his 
business really was, i.e., he has had no way of measuring its efficiency. 
With the facts that are made available by such an analysis as is here 
provided, he can more readily find the strong and the weak points in 
his system of management and thus make improvements with some 
confidence in the results. 

Many of the items to be recorded may appear to be rough esti- 
mates, but those who undertake studies of this kind on a large scale 
will be surprised to find how intimately most farmers know the 
details of their business when it is analyzed into the elements that 
correspond to the terms in which the farmer thinks when studying 
his business. A farmer may not know offhand what his total farm 
income is, but he does know with considerable accuracy the facts 
necessary to determine this income. It is important also to remem- 
ber that the final result of the analysis of a farm business is deter- 
mined mainly by a few large items which the farmer does know quite 
accurately. Variations in the numerous small items are as likely to 
be above as below the correct values and hence tend to balance 
each other. A variation of a few dollars in the final result is not 
a matter of great importance and would not seriously affect the 
conclusions. 

The problem of farm accounting is not a question of a particular 
kind of form or blank, but of knowing what accounts to keep and what 
use to make of them. The method of farm analysis given in this 
bulletin is that which has been used in the Office of Farm Manage- 
ment for a number of years in the study of the business of farming. 
A crop record and a live-stock record should be kept and summarized 
in a form like that shown on pp. 3S6-S8? 






3 86 



AGRICULTURAL ECONOMICS 



to 

a 

< 
in 

05 

g 

s 
§ 
a 


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d 
§ 

< 


:::::::::;:::: 






a 

<: 
in 

w 

PS 

O 
Pi 

O 


2 








u 

,u 

Ph 




4-1 

a 
a 
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£ 
< 






"3 

O 

H 






u 

<! 

I-C 

Ph 




w 
Pi 

O 
Pi 
U 


en 

4> 

u 

< 










Cern for grain 

Corn for silage 

Other corn 

Potatoes 

Hay 

Alfalfa 

Spring wheat 

Winter wheat 

Rye 

Oats 

Barley 

Buckwheat 

Straw 

Etc ....: 



RECORDS AND ACCOUNTS 



387 



A 




P4 


M 





u 


u 


a 

173 


w 


& 


«] 


M 


pj 


u 


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en h p) «j «J «J * 



: £ So 

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3 3 






388 



AGRICULTURAL ECONOMICS 
RECEIPTS FROM STOCK PRODUCTS 





Amount 


Price 


Operator 


Landlord 


Butter 










Creamery milk 










Market milk 










Cheese 










Wool 










Eggs 










Hides .' 










Honey 










Breeding fees 






























Total 













LIVE-STOCK SUMMARY 



Operator 



Landlord 



Stock products 

Stock sold 

Value of live stock at end of year 

Total 



Live stock purchased 

Value of live stock at beginning of 
year 



Total 

Live stock, net increase. 



If there are receipts from other sources, such as cash labor, 
machine work, or sale of timber products, they should have a separate 
account. An inventory must be kept of all farm property — buildings, 
machinery, feed, and supplies, and record made of all improvements, 
such as new buildings, fences, or machinery. On the other hand, 
there must be a charge for depreciation which has occurred during 
the year in the value of equipment and buildings. An accurate 
account of current expenses must, of course, be kept at all times. 
Memorandum records of such items may be transferred to the follow- 
ing summary account: 



RECORDS AND ACCOUNTS 
CURRENT EXPENSES 



389 



Regular hired labor mo. 

Extra hired labor mo . 

Board hired labor mo . 

Family labor mo . 

Board of family labor 

Repair of machinery 

Repair of buildings 

Repair of fences 

Feed: Hay, silage, etc 

Feed: Grain and concentrates. 

Feed grinding 

Silo filling 

Corn shredding 

Milk hauling 

Horseshoeing 

Breeding fees 

Veterinary 

Seed, plants, trees 

Fertilizer, manure 

Spray materials 

Twine 

Thrashing 

Baling 

Machine work hired 

Fuel and oil for farm work 

Bags, barrels, crates 

Cotton ginning 

Insurance 

Taxes on farm property 

Water tax 

Cash rent 



Total. 



Operator 



Landlord 



Finally, in order to get a bird's-eye view of the whole result of 
the year's operations, showing return upon investment and labor 
income, the following general summary is made. "Capital" here 
means the total of real estate, live stock, machinery, feed, and supplies, 
and cash on hand at the beginning of the farm year — the investment 
on which interest should be charged. 

The labor income represents the amount of money the farmer has 
left after paying all business expenses of the farm and deducting 
interest on the money invested in the farm business. In addition to 
the labor income the farmer has the use of the farmhouse and the 
products that are furnished by the farm toward his living, such as 
fruit, garden vegetables, dairy products, and fuel. In other words, 



39° 



AGRICULTURAL ECONOMICS 



the labor income is comparable with a hired man's wages when the 
hired man gets a house and garden and some farm products. 



SUMMARY 





Operator 


Landlord 




Item 


Total 


Item 


Total 


Capital 


-> 




-> 




Receipts from: 




Page 19, Crop sales 






Page 22, Live-stock, net in- 
crease 








Page 22, Miscellaneous 








Page 24, Increase feed and sup- 
plies 








Total receipts 


-> 


-> 




Expenses : 




Page 23, Current 






Page 23, Depreciation 








Page 24, Decrease in feed 








Total expenses 


-> 


-> 

Per cent re- 
ceived on 

invest- 
ment 




Farm income 






Interest on capital, per cent*. . . . 














Farmer's labor income 













* Use current rate of interest on well-secured farm loans. 



The difference between receipts and expenses, or farm income, will 
not necessarily correspond to the money on hand or in the bank, as 
personal and living expenses have to be paid out of this amount. 
Furthermore, in the case of farmers having mortgages or other debts, 
the interest on these, as well as any principal paid, must come out of 
the farm income. Therefore, the record of the farm business may 
show a fairly large difference between the receipts and expenses, and 
yet the farmer may not have any money to show for it at the end of 
the year, owing to the fact that the funds have been spent for living 
or for personal uses or have been put into other investments, such as 
insurance and paying off the mortgage. The object of this record is 
to analyze the farm business; that is, to ascertain how much the 
farmer makes, not to determine how much he actually saves. Having 
learned what the farm is returning, the responsibility rests with 
the farmer as to how much he spends personally or uses in other 
ways. 



RECORDS AND ACCOUNTS 391 

127. AN ILLINOIS SYSTEM OF ACCOUNTS 1 

Four things must be known in order to have a fairly accurate 
record of a farm business for any one year. These are as follows: 

1. The value of the real estate, stock, feed, grain, supplies, and 
machinery at the first of the year as determined by careful inventory. 

2. The total farm receipts 2 for the year. 

3. The total farm expenses 3 for the year. 

4. The value of real estate, stock, feed, grain, supplies, and 
machinery at the end of the year as determined by another inventory. 

A summary of the information contained in such a record will 
enable the farmer to determine the financial result of the farm business 
for the year. 

The net farm income, as used here, is the income received from the 
use of capital invested and the labor performed by the operator of the 
farm after deducting all of the other expenses of the farm business. 
This net farm income varies from year to year, depending on the 
management of the farm and on such factors as variation in seasons, 
fluctuation in prices, diseases among live stock, etc. These are con- 
ditions over which the farmer has little or no control. 

Man labor has quite a definite value at farm work when no capital 
is invested. For instance, in Illinois the single farm hand receives 
from $300 to $450 and board annually. In the case of the married 
man, the cash wage is about the same and in addition to this he usually 
receives house rent, use of garden, use of a cow, and other miscellane- 
ous items, which make his real wages about the same as those paid 
the single man. This represents only the labor wage of a man on the 
farm and is no measure of his ability to operate a farm. 

The farm operator, as compared with the hired man, has an 
opportunity to demonstrate his ability to manage a business with 
considerable capital. Since his labor has quite a definite value and 
the farm earnings vary from year to year, the man's value as a 
manager is hard to determine. When the interest at the usual rate 

1 From the Farm Account Book prepared for the Champaign County Agri- 
cultural Improvement Association by the Extension Division of the College of 
Agriculture, University of Illinois. 

2 The term "total farm receipts," as used here, means the total income from 
the farm for the year; that is, it includes all cash receipts from the farm and the 
increase in value of improvements, live stock, grain, supplies, machinery, and 
other farm equipment. 

3 The term "total farm expenses," as used here, means the total cost of the 
farm business for the year; that is, it includes all cash expenses of the farm, the 
decrease in value of improvements, live stock, feed, supplies, tools, machinery, 
and the value of the unpaid family labor not including the operator's wages. 



192 



AGRICULTURAL ECONOMICS 



on the capital invested in the farm business is greater than the ordinary 
wages a man can earn as a farm laborer, the interest earned on the 
investment is the best measure of a man's ability to manage a farm. 
For example, the investment represented by the majority of the farms 
in this section at ordinary rates (5 per cent, for example) amounts to 
$1,500 to $3,000 annually and the farmer's wages as a laborer amount 
to only about $500. The rate of interest earned is, therefore, ordi- 
narily the item of most importance in determining the success of the 
farm business. In any event, the ordinary farmer in this region is 
accustomed to thinking in terms of the rate of interest earned on the 
investment as do most other business men with large investments. 

INVENTORY OF REAL ESTATE AT THE BEGINNING OF THE YEAR 



Number 
of Acres 



Value 
per Acre 



Total 
Value 



Total value of land, including value of buildings 



LIST VALUE OF FARM IMPROVEMENTS HERE 



Kind of Improvement 


Value at 

Beginning of 

Year 


Value at End 
Year 


Dwelling-house 






Other houses 






Barn 






Corn crib 






Granary 






Hog house 






Hen house 






Machine shed 


















Other permanent improvements 
Fencing 






Tiling 






Phosphate 






Limestone 












Totals 






Place smaller total under larger 






Difference shows 


Decrease 


Increase 



RECORDS AND ACCOUNTS 393 

INVENTORY OF REAL ESTATE AT THE END OF THE YEAR 



Number 
of Acres 



Value 
per Acre 



Total 
Value 



Total value of land, including value of bulidings 



The difference in the value of a building or other improvement at the beginning and end of the 
year should take into account any decrease in value due to the year's use, and any increase in value 
due to repairing or renewals. For example, if we estimated that a barn, valued at $1,500 at the 
beginning of the year, would usually last twenty -five years, the rate of depreciation would be 4 per 
cent (or $60) for the year's use. The value at the end of the year would then be put down as $1,440. 
If during the year more than the normal amount of repairs have been put on the barn, say $100 worth, 
the value at the end of the year would be put at $1,540. If new buildings have been put up during 
the year, the inventory would be increased by the value of such improvements. 

In the case of limestone applied, the cost of limestone should be charged off over four or five 
years, that is, $100 worth of limestone should show a decrease in value of $20 to $25 a year in the 
inventory. In the case of phosphates, the removal of twenty average crops of grain will remove only 
about as much phosphorus from an acre as is contained in one-half ton of rock phosphate, so it may 
be considered a permanent improvement for this purpose. 

The inventory value for the land itself should not be changed from year to year only in so far 
as new permanent improvements have been added, such as ditching, tiling, fencing, etc. 

[This is followed by a separate inventory and cash account for 
each of the classes of stock — horses, cattle, hogs, sheep, and poultry. 
These accounts are then summarized to show net increase or decrease 
for each class and for all live stock. Then come inventories of 
machinery and of feed, grain, and supplies, followed by a record of 
crop sales and miscellaneous receipts. The expense accounts are 
kept under several separate heads, as shown in the summary which 
follows :] 

SUMMARY OF ALL EXPENSES 



Account 



Permanent improvements 



Page 23 



Total Amounts 



Live stock 


Page 24 


Crops 


Page 25 


Feeds purchased 


Page 26 


Machinery- 


Page 27 


Hired labor 


Page 28 


Rent, taxes, and insurance 


Page 29 


Miscellaneous 


Pages 29-30 





Total farm cash expenses 



[In contrast to the method of the United States Department of 
Agriculture it is worth noticing that the account for permanent 



394 



AGRICULTURAL ECONOMICS 



improvements includes outlays for u new buildings, building repairs, 
new fences, fence repairs, drains, paint, phosphate, limestone, etc." 
Also there is an account provided for the "value of family labor (not 
paid in cash)." This does not include the value of the operator's own 
labor, but does include an estimate of the cash cost of board of the 
other family workers. 

The whole record is then brought together in the following 
summary :] 

SUMMARY OF THE YEAR'S FARM BUSINESS 



No. 




Total Farm 


Tenant's 
Share 


Landlord's 
Share 




Capital at the Beginning of the Year 








I 


Real estate Page 3 








2 


Live stock Page 15 








3 


Machinery Page 17 








4 


Feed, grain, and supplies Page 20 








5 


Total capital 


i 






Farm Receipts 








6 


Increase in value of real estate Page 3 








7 


Net increase from live stock Page 15 








8 


Increase in value of machinery Page 17 








9 


Increase in value of feed, grain, 

and supplies Page 20 








IO 


Crop sales Page 21 








ii 


Miscellaneous receipts Page 22 








12 


Total receipts 










Farm Expenses 








13 


Decrease in value of real estate Page 3 








14 


Net decrease from live stock Page 15 








15 


Decrease in value of machinery Page 17 








16 


Decrease in value of feed, grain, 

and supplies Page 20 








17 


Current expenses, total Page 30 








18 


Value of unpaid family labor Page 31 








19 


Total expenses 








20 


Receipts less expenses (net farm income) 








21 


Estimated value of operator's labor 








22 


Net farm income less value of operator's 
labor (income from use of capital) 








23 


Rate of interest earned on capital 









RECORDS AND ACCOUNTS 
D. Comparison of Results 



395 



128. THE DEADLY PARALLEL COLUMN 1 

The following chart shows the average results obtained on twenty 
farms in Champaign County for the year of 191 5. These farms were 
the best twenty out of eighty, as measured by the interest they paid 





Average of 

Twenty Better 

Farms 


Your Farm 


Total capital 


$53,026.00 




Working capital* 


4,248.00 




Total acres 


217.OO 




Acres in crops 


188.OO 




Working capital per acre 


IO.55 




Gross receipts 


5,890.00 




Expenses (cash, family labor, and depreciation) 


1,704.00 




Net receipts 


4,186.00 




Interest on investment 


7.89% 




Net receipts per acre 


17.68 




Diversity of business 
fReceipts: Corn 


$2,616.00 




Oats 


1,625.00 




Wheat 


434.OO 




Horses 


123.OO 




Cattle 


183 . OO 




Dairy products 


313.OO 




Hogs 


345 00 




Poultry 


140.00 




Quality of business 
Yields of: Corn 


Acres Yield 
98.9 53-9 




Oats 


65.9 63.1 




Wheat 


13.6 32.8 




Clover and timothy 


6.3 1.8T 




Alfalfa 


1.4 4 T 




Labor 

Crop acres per man 


87 




Crop acres per horse 


21.2 





* Working capital includes the investment in all live stock, machinery, ami foods. 

t The prices allowed on grain were the actual prices received for grain that had boon sold, and 
for the grains on hand $0.60 per bushel for corn, $0.35 for oats, and $1.00 for wheat was allowed, 
which were the actual grain prices at the time the records were secured. 

1 From Farm Account Book, Extension Division, College of Agriculture, 
University of Illinois. 



396 AGRICULTURAL ECONOMICS 

on the total farm investment. The blank column headed "Your 
Farm" may be used to compare the results from your own farm with 
what other farmers did under the same general conditions. 

At the end of the year we hope to be able to provide you with 
similar statements for 191 6 for a greater number of farms than here 
represented, and for various sections of the state. These figures will 
have increasing value as they include more years, since they will tend 
to overcome the seasonal variation of any one year. 

129. SOME TESTS OF FARM EFFICIENCY 1 

Number of crop acres per work horse 

Number of months of man labor, including operator's 

Number of man-labor years 1 

Number of crop acres per man 2 

Percentage of total investment in real estate .' 

Investment in buildings per crop acre 

Number of animal units 3 

Investment in barns per animal unit 

Number of productive man- work units 4 

Number of productive man- work units per man 

Man-labor .cost per productive work units 

Net receipts per animal unit 6 

Value of feed consumed per animal unit 7 

Milk receipts per cow 

1 Divide number of months of man-labor by 12. 

2 Divide number of crop acres by number of man-labor years. 

3 In figuring the amount of live stock on the farm, it is necessary to have some basis for compar- 
ing the different kinds of animals. One horse, cow, or steer is equivalent to one animal unit; two head 
of young stock (of the above kinds) are counted as one animal unit; 7 sheep, 14 lambs, 5 hogs, 10 
pigs, or 100 chickens are each counted as one animal unit. 

« 1n order to compute the time required for different farm operations, a normal day's labor of 
10 hours is considered a work unit. See Table I, p. 397. 

5 Find the cost of all farm labor, including value of operator's, and divide by the number of 
man-work units. 

6 Divide the net increase under live-stock summary by the number of animal units, not 
including work horses. 

' Find the total at farm prices of the value of all crops fed, plus a charge for pasture, plus amount 
of feed bought, and plus or minus the difference in the feed inventory, and divide by the number of 
animal units. 

Note 

Efficiency of labor. — There are but few standards of farm labor, few 
measures of how much work a man should do in a day. Generally 
the worker must be his own boss and must set his own pace. He 
must also work under most adverse weather conditions at certain 
times. It is perfectly evident that innumerable factors will influence 
the time required for most operations. They cannot be standardized 
as work is in a factory. Some men are naturally slow and take twice 
as much time as others to do certain kinds of farm work. There has 

1 From Farmers' Bulletin 661, pp. 12, 13, 26. 



RECORDS AND ACCOUNTS 



397 



been considerable investigation of this subject, but not enough to give 
reliable standards of farm labor for all conditions. Table I gives 
approximate standards for average conditions for certain classes of 
work. These, or such modifications of them as local experience may- 
render advisable, may be used in working out the approximate amount 
of both man and horse labor required to operate a given farm. 

TABLE I 

Approximate Work Units Needed for the Production of Crops and in 

Caring for Live Stock, etc., a Work Unit Being a 

io-Hour Day of Man or Horse Labor 



Operation 



Work Units (io-Hour Days) 



Man 


Horse 


I 


I 


2 


3 


2 to 3 


5 


6 


6 


4 to 6 


5 to 7 


3 to 4 


3 to 4 


8 to 12 


10 


8 to 12 


4 to 6 


7 


7 


4 


2 


13 


12 


3 


1 


4 


4 


20 


7 


5 


5 


IS 


5 


8 


1 


12 


1 
2 


15 to 20 


1 to 2 


2|t0 3 


A 


10 


2 . 


20 


2 


30 


5 


50 


5 


15 to 25 


1 



Production of crops (per acre) : 

Timothy, alfalfa, and clover hay, per cutting 

Oats, wheat, barley, rye, buckwheat, and millet. . . 

Corn husked from standing stalks, Corn Belt states 

Corn husked from shock 

Corn for silo 

Corn husked, southern states 

Potatoes 

Cotton 

Sugar beets 

Melons 

Cabbage 

Peanuts 

Sorghum sown broadcast, cut for hay 

Tobacco 

Field beans 

Apples 

Caring for live stock (per year) : 

Horses, Corn Belt states 

Horses, eastern states 

Dairy cows 

Young stock, cattle, colts, etc 

Ten hogs, Corn Belt states 

Ten hogs, eastern states 

Ten brood sows and raising pigs to weaning 

100 ewes 

100 chickens (well cared for) 



RECEIPTS FROM LIVE STOCK 

The importance of having efficient live stock is well understood. 
By efficient animals is meant those that will more than pay for the 
cost of keeping. On the majority of farms, except in the southern 
and certain of the western states, more of the crops are fed to live 
stock than are sold direct. In fact, on many farms none of the 



398 AGRICULTURAL ECONOMICS 

feedable crops are sold. The animals are then the market, and the 
price they return for these crops is measured by their efficiency. 
The best of corn crops and hay count for little when sold to animals 
that return much below market prices for them. 



E. Cost Accounting 

130. THE ACCOUNTING METHOD OF STUDYING THE FARM 

ENTERPRISE 1 

By H. C. TAYLOR 

Cost accounting is a method of ascertaining such facts regarding 
the operation and results of a business as will enable the operator to 
know what to produce and how to produce it in order to secure maxi- 
mum profits from the business. The data secured by this method 
may have some general value, but its primary purpose is to give a 
basis for more intelligent direction of the operations of the factory 
or the farm for which the accounts are kept. 

The one who plans the records and their tabulation must have a 
clear vision of economic forces if he would plan a successful system of 
accounts, for economic forces determine what should be done on the 
farm. The system of accounts must show quantitatively the work- 
ings of these forces at a given time and place. 

In agricultural accounting, the first problem is to contrive a system 
of records which will show what to produce. This problem is more 
complex in farming than in almost any other business. In very few 
districts does the farmer devote himself exclusively to one enterprise. 
This is not due to any peculiar characteristics of the men engaged in 
the business, but is inherent in the natural conditions under which 
crops must be grown. There are more or less definite times when 
planting, harvesting, etc., must be done, and it is rarely found that 
one enterprise, such as wheat growing or corn growing, occupies all 
the farmer's time. 

The problem of first importance in the organization of a farm for 
profits is that of correlating a group of enterprises upon one farm in 
such a manner as will keep the labor and equipments employed as 
nearly continuously as practical, and in that enterprise which will 
yield the largest returns of all those which can be carried on at the 
given time of year. 

1 From Research Bulletin 16, Wisconsin Agricultural Experiment Station. 



RECORDS AND ACCOUNTS 399 

It is a matter of common knowledge that the production of a crop 
of corn does not require labor continuously throughout the year. The 
same is true of oats, and it happens that the nature of these plants 
is such that oats can and must be sown earlier than corn, and that % 
oats require no further attention until after the corn has been planted 
and cultivated. The harvesting and thrashing of the oats are or can 
be over before the corn is ready to be harvested. These crops are, 
for these reasons, said to be complementary (compare Figs. 15 
and 18). 

Corn is not the only crop which requires attention at the given 
time of year. In some regions, tobacco and corn are both open to 
the farmer's choice. In some places the sugar beet is an alternative; 
in others, cotton. Likewise, the farmer has a choice of several crops 
in the seasons when oats are sown and harvested. Barley and spring 
wheat will suggest themselves as alternatives to oats in certain regions. 
The crops which require attention at the same time of year are said 
to be competitive (Figs. 18 and 19). 

It is obviously to the farmer's interest that he select from each 
group of competing crops the one which will add most to his net 
income. It is equally clear that he will desire to combine as many 
complementary enterprises as will add to the profitableness of the 
business as a whole. 

The problem the accountant has before him is the planning of 
such records as will show the way in which the various complementary 
enterprises fit together to fill out the year's employment, and such 
records as will enable him to show the relative profitableness of each 
of the competing enterprises. 

To secure these results a labor record is a necessity. A labor 
record showing the exact distribution of all man and horse labor 
employed each day in the year gives the material for a chart which 
will show the time employed in each enterprise. The charts for the 
various enterprises on one farm will show the complementary character 
of certain crops, and the charts for a series of farms in the same 
locality on some of which the one, on some the other, of a group of 
competing crops are being grown, the competitive character of certain 
crops can be shown. 

It is necessary to know what was done and what might have boon 
done in.order to judge the merits of the management. A labor record 
may show the hired man was cutting wood on a given forenoon in 
June. If supplementary data show the land was too wet to be 



400 



AGRICULTURAL ECONOMICS 



cultivated and that the clover was not ready to be cut, etc., it may 
prove to be true that cutting wood was the most profitable work the 
laborer could be doing. If, however, in July the records show a 



V) 


MAR. 


APR. 


MAT | JUKE 


JULT 


AUG. 


SEPT. 1 


. 0CT - 


Nov 


■ I??,?;. 


JAN. 


FEB. 


«/> 












BARLEY 












1 


SO 
























60 


50 
























50 


40 
3D 


















1 








40 
30 


20 








II 


















20 


10 




Ill 






















10 






Mil 




111 


. 



















MAR. 


APR. 


'MAT 1 'jUNE 


JUL 


i 


AUG. 


SEPT. 


OCT. 


NOV. 


DEC. 


JAN. 


FEB. 



OATS 



MAR. I APR. I MAT I JUNE I JULT , I AUG. SEPT. I OCT." I ' NOV. I ' DEO. I JAN. I FE 
Figure IS.— Distribution of mas labor on 10 acres of oats In 1910. This crop was sown earlier and harvested later than barley and required 17.2 
hours of man labor per acre. Oats and barley seem to be complementary but by selecting a proper variety of oats, the time spent on barley 
might be devoted to oats- A profit of $15.04 per acre or 83 cents per . hour of man labor was made on this crop. 

SP. WHEAT 



20 



MAR. I APR I MAT I JUNE I JULT I AUG 
I If.— Distribution of man labor on 4.3 acres of wheat. The wheat and < 
»rt> dearly competitive Wheat required 17.3 hours of man labor per acre 



SEPT. I OCT. I ' NOV I ' DEO." I ' JAn" I ' FEB.' 



20 



half-day spent in repairing a binder preliminary to commencing grain 
harvest, which time might have been employed in cultivating corn, 
or in harvesting hay or grain, the student of the problem of farm 



RECORDS AND ACCOUNTS 



401 



management will have a right to question the wisdom of cutting wood 
that day in June which might have been used in repairing the binder 
and thus resulted in the saving of valuable time in July. 





MAR. 


( APR, 1 *±J n 


JUNE I 


JULY 


Ava, ,1 sept I 


OCT. 


™7;.| 


DEO. 


JAN. 


FEB. 




or. 










HAY 












| 


30 






















30 


20 






















20 


IC 








1 
















10 



MAR. 


' apr 1 'may 


JUNE 1 


JULY 


'aug." 1 sept.' 1 


OCT. 


NOV. 


DEO. 


JAN. 


' FEB." 



Figure IT.— Distribution of man labor on 16.8 acres of hay. The production of hay makes a heavy demand for labor for a short period only. 
Fortunately this demand comes before small grain harvest and at a time when the corn Is large enough to be cultivated f.iplclly. The hay on 
the farm under consideration required 7.6 hours of man labor per acre and gave a profit of $14.75 per acre or $1.W per bow of man labor. 



CORN 




L 



MAR. 1 APR, 

Figure 18.— Distribution of man labor on 30% acres of 
tlon but competes with tobacco for labor during 
* profit of $6.86 per acre or 29 ccDts per hour of man labor. 



JULY I ' AUG!' I SEPT.' I ' OCT." I ' NOV.' I 



FEB. 













TOBACCO 












40 














30 


















20 










, 






| 




10 





1,1. i 


l.l.ll t 


1 I 


In 


r'l 




,ll 


I 


1 


I 


MAR. 


APR. 1 I 


4AY 1 JUNE 


JULY 


AUG. 


1 SEP 


» 1 

r. 1 oct. 


NOV. 1 DEO. 


' JA> 


': 


FEB. 



Figure 19.— Distribution of man labor on 3% acres of tobacco. Tobacco required labor at times which conflicted with 
cultivation but on tbc other baud It mndc large demands for labor at times when other crops demand 00 attention, 
and tobacco harvest did not conflict. The corn was cut for fodder but If It had been cut for sllasc there ml«M 
tobacco demanded 1W.1 hours of man lnbor per acre and yielded a profit of 110.61 per acre or '.> cent* per hour of mi 



On this farn 
have been a 



com harvcti 

conflict. The 



The problem of crop selection may be illustrated and further 
elaborated by the study of Figs. 14-19. It happens that the farmer 
for whom these records were tabulated produced barley, oats, spring 



402 AGRICULTURAL ECONOMICS 

wheat, hay, corn, and tobacco. When the field labor on this farm 
is charted, it becomes obvious that during May, June, and a part of 
July, corn and tobacco are competitive. The labor is some days on 
the one crop, some days on the other, and knowing the character of 
the crop it is fair to assume that had he planted more corn and no 
tobacco, the time put on the tobacco during the period of planting and 
cultivation would have been put on the corn (Figs. 18 and 19). 

When the three small grains are compared with corn and tobacco, 
it is clear that they are sowed before the time for planting corn or 
tobacco; also that they are harvested in the latter part of July, 
apparently after the tilled crops were laid by. This suggests that 
these small-grain crops are complementary to the tilled crops from 
the standpoint of demand for man and horse labor. It is known also 
that these groups of crops are complementary from the standpoint 
of the demands of a good system of crop rotation. The small grains 
may provide nurse crops for grasses and legumes. The tilled crops 
clean and give tilth to the land. 

In studying the demands of the various crops upon the time of 
the farmer, operations should be divided into two classes: (1) those 
which must be done within very narrow limits of time, such as seeding 
and harvesting of small grain, the planting and cultivation of tobacco, 
and (2) those which can be done equally well at any time through a 
period of considerable length, such as plowing and thrashing. Labor 
of the former class should always take precedence over that of the 
latter class, but labor of the second class should not be put off until 
it must be done when labor of the first class is demanding attention. 
If plowing is left too long, it may delay the planting ; if threshing is post- 
poned too long, it may conflict with tobacco harvest or silage cutting. 

Passing from these more general conditions shown by the chart 
to the further details of each of these groups, it is interesting to note 
the way in which this farmer employed his labor on the three spring- 
grain crops. The wheat and the oats were seeded and harvested so 
nearly at the same time that they appear to be strictly competitive. 
The barley, however, is sown later and harvested earlier. Barley has 
a shorter season. By a proper combination of barley with the other 
spring grains, both the seedtime and the harvest were spread over a 
longer period. This might have been accomplished by selecting two 
varieties of oats which vary in length of their period of growth. 

While corn and tobacco appear to be competitive during the season 
when corn is cultivated, it appears that they are complementary in 



RECORDS AND ACCOUNTS 



403 



their demands for labor in the later operations. The cutting of the 
tobacco preceded the cutting of the corn and the husking or shredding 
of the corn preceded the stripping of the tobacco. Had the corn been 
cut for silage, the harvesting of the corn and the tobacco might have 
demanded labor at the same time. 

Hay harvest took the labor of the farm from the corn and tobacco 
fields for about a week at the end of June. Hay crops differ with 
respect to the time they must be harvested. The later in the season 
of corn cultivation the hay harvest comes the less serious is the con- 
flict with the corn crop. The cultivation of corn when it is small is 
a slower process than when it has attained a height of a foot or more. 
The amount of corn one can cultivate when it is small sets a limit to 
the size of the corn crop. One can cultivate this amount at the later 
stages and have time left for making hay. Hence the hay harvest 
may come at a time when it can be counted complementary to corn. 
A study should be made of alfalfa, clover, and other hay crops with 
respect to the way in which they can be fitted into a system of com- 
plementary enterprises. If, for example, it should be shown that the 
first cutting of alfalfa must be harvested just at the time when corn 
demands its first cultivation, it would become obvious that to increase 
the alfalfa crop will necessitate a reduction of corn. The question then 
would be, "Which of these crops adds most to the profits of the farm ?" 

The next step in the study is to compare the relative profitableness 
of the competing crops. The accompanying table illustrates methods 
of comparing relative profitableness. 

METHODS OF COMPARING PROFITS* 







Profit per 
Hour of Labor 



$0,734 
O.785 
O.969 
1.868 
0.371 
0.093 



* Based upon records secured in co-operation with the 
United States Department of Agriculture. 

These figures are for the same farm for which the labor distribu- 
tion is shown in Figs. 14-19. In calculating profits on the specific 
crops the general farm expenses were not considered. It is relative 
profitableness, not the absolute net profit, which is compared. 



404 AGRICULTURAL ECONOMICS 

No generalization can be drawn from this table as to which crops 
will, as a rule, be most profitable to the farmer. It happened that 
the small-grain crops were good and the corn crop generally poor the 
year these records were kept. It happened also that half the corn 
and all the tobacco had to be planted a second time, which increased 
the labor cost of these crops. But this table is of significance in that 
it contains evidence that the farmer or the experiment station worker 
is in danger of going wrong if he applies generally the common method 
of comparing profits per acre. On the basis of profit per acre, the 
tobacco was almost three times as profitable as the corn, but on the 
basis of profit per hour, the corn was about four times as profitable 
as the tobacco. Where approximately the same labor is expended 
per acre the same result is reached, whether one uses the acre or the 
labor basis. As has already been suggested, profit per acre multiplied 
by the number of acres the farmer can handle of the two crops may 
be a means of combining the acre and the labor basis of calculating 
relative profits. 

The relative merits of these methods will not be discussed here. 
All methods should be tested and a search made for the best possible 
plan for comparing the profitableness of crops. 

Taking profits per unit of labor as a starting-point for further con- 
sideration, note some of the limitations and complexities involved in 
its use. Where two crops can be found which require the attention 
of the farmer at exactly the same time throughout all their operations 
and in forms of labor which require the same amount of managerial 
activity per unit of labor, the question of relative profitableness is 
easily worked out on the basis of profit per unit of labor, but where 
crops are competitive for a portion of the year and complementary 
for the remainder of the year, the solution of the problem of relative 
profitableness is not so simple. 

Corn and tobacco give a good example. These, crops are com- 
petitive at the states when it is vital that the work be done without 
delay. This means that the one crop cannot be increased without 
decreasing the other. Yet a very large proportion of the labor on 
these crops can be performed, as shown in Figs. 18 and 19, without any 
conflict of one with the other. Before any conclusion can be drawn 
as to which of these crops yields the larger return per unit of labor 
it is necessary to ascertain to what alternative use the labor could have 
been put and the rate of return the labor would have yielded during 
the time devoted to harvesting and stripping the tobacco and the 
time of harvesting and shredding the corn. Using this rate as the 



RECORDS AND ACCOUNTS 405 

" opportunity cost" of the labor at these periods and charging it 
against the crop using the labor at these times of non-competitive use, 
the remainder of the net return to labor can all be accredited to the 
labor during the period of competitive use. The crop which, by this 
method, shows in the long run the highest return to labor during the 
competitive period will prove the more profitable. 

While the above illustrations relating to what to produce deal 
with crop selection, the problem of whether to sell or feed the feedable 
products of the farm, and the problem of the kind of live stock to 
keep, are equally important. The attention of a skilful accountant 
is required to plan a system of records which will give basis for passing 
judgment on these questions. 

131. A SYSTEM OF FARM COST ACCOUNTING 1 
By C. E. LADD 

The farmer wishes to know how much he is making or losing on 
his business each year, how much he is making or losing on each crop 
or class of animals, and how he can improve his business so as to make 
more money. Cost accounting for the farm is the same sort of work 
which the large meat-packing companies are doing to learn whether 
they make a profit on canned goods, smoked meats, etc. The farmer 
wishes to know whether his wheat pays and whether his cows or 
orchard pay. These are some of the things which a set of farm cost 
accounts will show. 

Many farmers are desirous of keeping accounts of this sort, but 
do not know how to start. Undoubtedly many are deterred from 
starting because they believe that they do not know enough about 
bookkeeping and because they have in mind no definite method of 
procedure. To any such men who desire to keep accounts and who 
have not worked out a system for themselves, it is believed that the 
system outlined in this paper will be helpful. 

Farm cost accounting, of necessity, involves many estimates, but 
there is no reason why one should lose faith or be discouraged because 
of them. If the worker has reasonably good judgment and is not 
prejudiced in favor of any crop or animal, he can obtain satisfactory 
results. The systems of cost accounting in use by the large packing 
companies and by large wholesale grocery houses involve as mam- 
estimates and do not give any more accurate results than do well- 
kept farmers' accounts. 

1 Adapted from Farmers' Bulletin 572. 



406 AGRICULTURAL ECONOMICS 

Cost accounts cannot be absolutely exact. They contain many 
estimates. It is foolish to spend time with the refinements in methods 
of bookkeeping that are designed to check exact work to the last cent. 
In fact, attempts to find insignificant errors often disgust persons with 
the whole question of accounting. 

In order to have a complete set of farm accounts three records are 
necessary: (i) an inventory at the beginning and at the end of the 
year; (2) an account of all money paid out or received; (3) a record 
of all work done by men and horses during the year. 

The annual inventory shows the annual gain or loss on the farm 
business, but it does not show what crops or what animals have made 
a gain or loss. On nearly every farm where accounts have been kept 
the gain or loss for the year resulted from losses on several accounts 
and gains on several accounts. In every case the farmer was much 
surprised to see which accounts showed a gain and which a loss. 
Results like these can only be shown by a complete system of accounts. 

A record of the receipts and expenditures on the farm is necessary 
for a complete set of accounts. For this purpose the page is ruled 
and items are entered as shown in the sample account with potatoes 
in Table II. The financial record book at the end of the year 
becomes the completed account book and will have a summary of 
labor entered in it from the work record as described later. 

A separate account is kept with real estate, each crop grown, each 
class of animals, machinery, labor, interest, persons dealt with, bills 
payable and bills receivable, and with such other items as may be 
found necessary or convenient. 

The items that make up bills payable and bills receivable should 
be listed in the inventory at the end of the year, as mentioned, either 
from memoranda or in any other way which may be found convenient. 
In closing out the inventory at the end of the year, the items for which 
money is due or owing should be charged or credited to their respective 
accounts. When these bills are settled, during the early part of the 
following year, the entries should be made under bills payable or bills 
receivable, ^as the case may be. 

In this book two pages facing each other are taken for each 
account. The name of the account is written at the top of the page. 
The right-hand page is marked " Credits, " and is used only to record 
credits to the account. The left-hand page is marked " Charges," and 
is used only for charges against the account. The pages then appear 
as shown in the sample account with a crop of potatoes (Table II). 



RECORDS AND ACCOUNTS 



/ 

407 





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408 AGRICULTURAL ECONOMICS 

Now, suppose that on a trip to town on June i one spends $i .40 
for horseshoeing, $3 for fencing, $5 for cow feed, and receives a $65 
check for 6,500 pounds of milk. The entries are made as follows: 
The account marked "Horses" is turned to and on the left-hand page 
is entered "June 1 — Shoeing, $1 .40." The "Real estate" account is 
turned to and on the left-hand page is entered, "June 1 — Fencing 
bought, $3." The "Cows" account is turned to and on the left-hand 
page is entered, "June 1 — Cow feed bought, $5." On the right-hand 
page, under this same account, is credited, "June 1 — Milk, 6,500 
pounds, $65." 

These entries are now complete; they will never have to be posted 
or entered again in any way. It is often advisable to keep a memo- 
randum book in the pocket in which to make notes when money is 
paid out in town, so that the items will not be forgotten before they 
can be entered in the account book. 

Whenever money is paid out, the farmer turns to the account in 
the book to which this money should be charged and enters it on the 
left-hand page. Whenever money is received the amount is credited 
to the proper account by entering it on the right-hand page under 
that heading. These are the only entries made. The amounts are 
charged or credited directly to the accounts to which they belong. 

Work record. — For the work record, a book ruled exactly like the 
financial record book, except that there should be two double columns 
at the right of the page, may be used. This should be indexed in the 
manner already described. In this book no separate pages are used 
for charges and credits and no entries are made in terms of dollars and 
cents. In the first double column at the right-hand side of the page 
are entered man hours and minutes, and in the second are written 
horse hours and minutes. These headings should be placed at the 
top of each column, so that the page appears as shown in Table III. 
This book contains simply a record of the work done on the farm 
during the year, classified according to the enterprise for which it was 
done, and it also gives the date and number of hours of each operation. 

The sample record with wheat shown as Table III will serve to 
illustrate the way the items should appear in the work record. 

Suppose that the date is May 1. The work done on this day 
aside from chores was drilling in oats 6 hours, with 2 horses; plowing 
for corn 8 hours, with 3 horses ; repairing plow, 2 hours of man labor 
alone. The entries are made as follows: The "Oats" account is 
turned to, "May 1 " written in the left-hand column, the single word 



RECORDS AND ACCOUNTS 



409 



"Drilling" written in the broad space in the middle of the page, and 
the figure "6" entered under man hours. Since 2 horses were used 
for 6 hours, the figure " 12 " should be entered under horse hours. In 
the same way, on turning to the "Corn" account, "May 1 — Plowing, 
8 [under man hours], 24 [under horse hours]" is entered. Turning to 

TABLE III 

A Sample Work Record with Wheat 





Operation 


Man 


Horse* 


IQI2 


Hours 


Minutes 


Hours 


Minutes 


Aug. 2 . . . . 


Plowing oats stubble 

Rolling 


8 

1 


30 
45 


17 
3 




30 







* Horse hours are expressed in terms of one horse for one hour. Hours of horse labor should 
not be charged against the horse account. 

the "Machinery" account "May 1 — Repairing plow, 2 [under man 
hours]" is entered. When this is done, the work entry for the day 
is complete; it will never have to be posted or written again. The 
original entry is the only entry made. 

For chores a special page should be ruled for each month, as 
shown in Table IV. 

TABLE IV 

A Sample Heading for a Page of an Account Book Showing the Special 
Ruling Required for Entering Chores* 





Horses 


Cows 


Poultry 


Hogs 


1913 


Hours 


Minutes 


Hours 


Minutes 


Hours 


Minutes 


Hours 


Minutes 


May 1 

2 

3 

4 

Etc.... 


2 


20 


4 


15 




30 


1 


IO 



*If horses are used in the chore work, extra columns must be ruled under each heading to pro- 
vide a place of entry of hours and minutes of horse labor. 

It is more accurate to enter the chores every day; but, if chore 
time is fairly uniform each day, so that the chore work for the entire 
month can be based on fewer entries, an entry at the beginning, at 
the middle, and at the end of the month will ordinarily be sufficient. 



410 AGRICULTURAL ECONOMICS 

Entries should be made at other times if the time spent on chores 
changes; for instance, when the cows are turned to pasture, when 
additional cows freshen, or when a change of feed is made which will 
require more time or less time, for chore work. 

Daily work necessary to keep a complete set of accounts. — The daily 
work of keeping a complete set of accounts ordinarily consists in 
entering receipts and expenses for that day and recording the hours 
of work done. On many days there are no cash receipts or expenses, 
as these are likely to be bunched on the days when trips are made 
to town. The entry of these items with the filling of the chore blanks 
for that day, if necessary, should not take more than five minutes. 
It is being done in less than an average of five minutes every day by 
51 New York farmers, whose education varies from that acquired in 
a district school to that of the college graduate, all of whom are work- 
ing every day in the field with their hired men. 

Entries of the value of all home-grown feeds consumed must be 
made in the live-stock accounts. All the feed bought is charged in 
the financial record book directly against the animals for which it 
was bought. If the hog feed were to run out some day and a bag of 
cow feed were taken to the hogs, the entries should be made in the 
financial record book just as if the cows had sold this feed and the 
hogs had bought it. 

At the time of thrashing or at the close of haying the total crop 
may be entered as a memorandum on the credit side of the proper 
crop account, but the figures are not yet to be carried to the money 
column. Estimates can be made with fair accuracy by measuring 
bins and haymows or by counting the loads drawn and estimating the 
average weight. The values will be entered when the product is sold 
or transferred to the animals. When these crops are fed out, an 
estimate must be made of the proportion fed to cows, horses, and 
other stock and these accounts charged with the values thereof, 
credit being given the crops. The quantity sold will be known from 
weighing bills or otherwise, and it should be credited as a cash receipt. 

Whenever grain or hay is fed from the same bin or mow to two 
or more classes of animals, a day's ration for each class of animals 
may be weighed or measured once a month or of tener and the proper 
proportion of the total feed, based on these weighings and the number 
of days fed, charged to each class of stock. 

Closing the accounts at the end of the year. — Considerable time is 
required to close the set of accounts. However, this figuring should 



RECORDS AND ACCOUNTS 411 

'v 
come in the winter at a time when other work is usually slack and 
when the weather is more favorable for working indoors than out. 
A definite order should be adhered to in closing the accounts. This 
order may be as follows : 

1. The first step is to take a final inventory in the same manner as at 
the beginning of the year. This inventory should include all bills that 
other persons owe the farmer and all bills which the farmer owes to other 
persons. 

2. The list of bills payable should be inspected and any items that have 
not yet been charged should be charged to the proper accounts. For 
instance, if $15 for labor is still due the hired man at the date of closing, this 
item should be entered as a charge against labor. 

3. The list of bills receivable should be inspected, and any items that 
have not yet been credited should be credited to the proper accounts. 

4. The record of all feed transferred to the live stock should be com- 
pleted, charging the various animals and crediting the various crops. Pro- 
duce raised and fed is charged against the animals at what it is worth on 
the farm. 

5. The various classes of live stock should be credited with the portion 
of unused feeds which were charged to them at the time of purchase or 
harvest. 

6. The use of pasture should be credited directly to the real estate or 
to a pasture account and charged against the animals using it. 

7. The value of produce used in the house, if not noted before, should 
be entered. The proper crops or animals should be credited and charges 
made against the personal account. 

8. The entry of value of board, produce, or other allowances furnished 
to the laborers should be completed. These charges should be made 
against labor and the proper accounts credited. 

9. The value of unpaid labor, such as work by the farmer himself, by 
boys in the family to whom regular wages are not paid, and milking or 
other farm work by women of the family should be entered. Make these 
charges against labor and credit the personal account. 

10. The animals should be credited with the value of the manure pro- 
duced and this amount charged against the crops to which it was applied. 

n. The proper amounts for the use of the buildings by crops, animals, 
the farmer, or laborers, should be entered. As a general rule, 8-10 per cent 
of the current value of the buildings may be charged as rent. The propor- 
tion of the whole sum which each class of animals or each crop should pay 
will have to be determined by the farmer in proportion to the amount 
and value of the space occupied by each. 

12. Taxes and insurance paid on personal property should be dis- 
tributed to the proper accounts. 



412 AGRICULTURAL ECONOMICS 

13. All the hours and minutes of man labor on each enterprise, including 
the chores, should be added up, these totals being brought together and the 
sum of the man hours on all enterprises found. 

14. The total cost of man labor for the year should be found. 

15. The rate per hour should be found by dividing the total cost of 
man labor by the total hours of man labor. 

16. The total number of hours found against each enterprise in the 
work record should be transferred to the same accounts in the financial 
record, multiplying each total by the rate to obtain the cost. These items 
should be credited to labor in the financial record book. When this is 
completed, the labor account should balance within a few dollars. This 
difference or error is not important enough to consider. It may be carried 
to the "Loss and gain" account, or it may be added to or subtracted from 
one of the larger items of labor. 

17. All the hours and minutes of horse labor spent on each enterprise, 
including any horse labor on chores, should be added up, these totals being 
brought together and the sum of the horse hours on all enterprises found, 
just as was done for man labor. 

18. To find the total cost of horse labor, first the horse inventories 
should be entered, the first inventory as a charge and the second as a credit 
to the horses. Then the horses should be charged with interest on the 
average of the two inventories at the current rate in the section and the 
interest account credited. The ordinary rate charged in most parts of the 
United States is 5 or 6 per cent on the investment. 

19. The sum of each side of the horse account should be found. The 
sum of the credits should be subtracted from the sum of the charges and 
the difference will be the net cost of horse labor for the year. No charge 
is made against horses for the use of the harness and other horse equipment, 
all these costs being charged against the various enterprises in the machinery 
charge, as hereafter explained, on the basis of horse hours. 

20. The rate per hour of horse labor should be found by dividing the 
total cost by the total hours. The figure thus obtained is the rate per hour. 

21. The total number of horse hours found against each enterprise in 
the work record should be transferred to the same accounts in the financial 
record, multiplying each total by the rate to obtain the cost. These items 
should be credited to the horse account in the financial record book, and the 
account balanced as in paragraph 16. 

22. To find the use cost of the machinery, the first machinery inventory 
should be entered as a charge and the second as a credit to the machinery 
account, then this account should be charged with interest on the average 
of the two inventories, as directed for the horse account. The interest 
account should be credited with the amount of this interest. 

23. The sum of each side of the machinery account should be found 
and the credit total subtracted from the charge total, the same as for the 



RECORDS AND ACCOUNTS 413 

horse account. The difference is the total use cost of the machinery for 
the year. 

24. In order to distribute this cost, it may be assumed that for every 
hour horses were worked machinery was also used. Then each account will 
have charged against it the same number of machinery hours as horse hours. 
To find the rate of cost per machinery hour, the horse hours already charged 
to machinery should be first subtracted from the total hours of horse labor 
and the total cost of machinery use divided by this difference. Now the 
use of machinery for the year should be charged in the same way that the 
use of horses was charged, except the charge against machinery. When 
this is complete, the machinery account should balance within a few dollars. 
The difference may be treated as explained in paragraph 16. 

25. Any other accounts of convenience, such as those for fertilizer or 
manure, if kept, should be distributed. 

26. All the remaining items should be entered in the inventories. The 
inventory values for the beginning of the year should be entered on the 
left-hand page of the separate accounts as a charge. The final inventory 
for the year is likewise distributed to the separate accounts, but the items 
are entered on their respective right-hand pages. 

27. The interest, based on the average inventories against all accounts 
not already charged, should be charged and the interest account credited 
with the total, using the same rate as that used in charging interest against 
the horse and machinery accounts. 

28. The proper charge for the use of the land should be entered. The 
rate should be high enough so that, with the use of buildings as charged in 
paragraph n, it will cover interest on the investment in land and buildings, 
taxes on real estate, and repairs to buildings and fences, for these items 
were charged to the real estate account. Each crop should be charged for 
the land it occupied and the real estate account credited. 

29. Both sides of the accounts not yet closed should be footed up. The 
lesser total should be subtracted from the greater in each account. If the 
charge side is greater the difference represents a loss, and if the credit side 
be greater, a gain. The sample potato account given in Table II (p. 407) 
will illustrate a completed crop account. 

30. A list of the losses and gains should be made and the total of each 
found in order to show the net gain or loss on the whole business. 

31. Each account and the business as a whole should be studied in order 
to learn how to improve it. 



VIII 

PRINCIPLES OF VALUE AND PRICE AS RELATED 
TO FARM PRODUCTS 

The ignorant farmer ascribes his own poor crops and his neighbor's 
larger yields to "luck," and thinks that mysterious and malevolent 
forces bring diseases upon his beasts and pests upon his growing plants. 
In these circumstances he is powerless, because he possesses no control 
over the powers that determine his harvest. The intelligent farmer, 
on the other hand, learns the life-cycle of the insect that destroys his 
crop, and strikes it in its susceptible stage. He learns the truth about 
hog cholera, and vaccinates his pigs and disinfects his premises. 
Knowledge gives him control of the elements of soil fertility. 

The same change is coming about in connection with the subject 
of values and prices. Farmers are beginning to be convinced that 
there are certain great forces working in the market, and that economic 
principles are competent to explain the manner in which market prices 
are created. Instead of blaming the dealer or the consumer for low 
prices, and talking of "fair" and "just" values, we are coming to 
see that we must work out our own salvation, and that knowledge 
gives control of the economic forces of the market not less than of the 
biologic forces of the field. 

The commercial farmer must face the problem of what he can 
sell, just as much as he must face the problem of what he can raise. 
If he aspires to make his sales profitable, he needs to study the extent 
and character of demand. Mr. Holmes has shown that the grower 
cannot raise what he himself likes and would desire to buy, for the 
consumer has other tastes and standards of judgment. Nor can he 
devote his attention to raising the things that grow best on his soil, 
regardless of whether they sell readily in his market. If, however, 
he can discover a reason why they should sell well, he has a good 
opportunity to create or stimulate a demand for the product which 
he could produce efficiently. (See selection 26.) 

These conditions of demand being ascertained, and the possibilities 
of modifying it having been exhausted, the farmer must direct his 
efforts toward creating a supply situation which will meet the demand 

414 



PRINCIPLES OF VALUE AND PRICE 415 

of the market upon a level of profitableness to himself. If all farmers 
reduce their acreage of a given crop or if some of them go out of that 
line of production altogether, the supply is reduced, and this lessened 
amount equated against the higher-priced portion of the whole 
demand. Undoubtedly such rational control of market supply is 
hindered by the farmer's lack of accurate knowledge of his costs of 
production, by the vagaries of the weather, and by the lack of harmony 
of action among many individual producers. Undoubtedly, too, the 
first and last of these difficulties are being gradually removed. Also 
the work of the Office of Markets of the United States Department of 
Agriculture is doing much to give producers of many of the less staple 
commodities a much broader and more accurate view of the actual 
conditions of demand in all markets and the supply available in com- 
petitive, producing sections. All these influences tend to increase the 
farmer's control over the forces under whose influence his prices are 
made. 

It is evident, however, that the farmer does not deal directly with 
those who are the ultimate demanders of his goods. He comes into 
direct contact, instead, with the dealers, who are the deputies, more 
or less remotely removed from the actual consumer of the goods. 
And since the ultimate parties to the contract come together only 
through the mechanism of the market, it becomes a matter of much 
concern whether this market mechanism be well designed and working 
smoothly; whether, in a word, it performs its task efficiently. Sec- 
tion F calls attention to the part played by markets, and chap, ix 
takes up a discussion of some phases of their work. 



A. Theoretical Foundations 

132. OF VALUE AND PRICE 1 
By JOHN STUART MILL 

The words "value" and "price" were used as synonymous by the 
early political economists. But the most accurate modern writers, 
to avoid the wasteful expenditure of two good scientific terms on a 
single idea, have employed "price" to express the value of a thing in 
relation to money; the quantity of money for which it will exchange. 
By the price of a thing, therefore, we shall henceforth understand its 

Adapted from Principles of Political Economy, Vol. I, Book III, chaps, i, 
ii, iii, and vi. 



416 AGRICULTURAL ECONOMICS 

value in money; by the value, or exchange value, of a thing, its general 
power of purchasing; the command which its possession gives over 
purchasable commodities in general. 

Before commencing the inquiry into the laws of value and price, 
I must give warning, once for all, that the cases I contemplate are 
those in which values and prices are determined by competition alone. 
In so far only as they are thus determined can they be reduced to any 
assignable law. The buyers must be supposed as studious to buy 
cheap as the sellers to sell dear. The values and prices, therefore, 
to which our conclusions apply are mercantile values and prices; such 
as are quoted in prices-current; prices in the wholesale markets, in 
which buying as well as selling is a matter of business; in which the 
buyers take pains to know, and generally do know, the lowest price 
at which an article of a given quality can be obtained; and in which, 
therefore, the axiom is true, that there cannot be for the same article, 
of the same quality, two prices in the same market. Our propositions 
will be true in a much more qualified sense of retail prices; the prices 
paid in shops for articles of personal consumption. For such things 
there often are not merely two, but many prices, in different shops, 
or even in the same shop; habit and accident having as much to do 
in the matter as general causes. Purchases for private use, even by 
people in business, are not always made on business principles: the 
feelings which come into play in the operation of getting and in that 
of spending their income are often extremely different. Either from 
indolence, or carelessness, or because people think it fine to pay and 
ask no questions, three-fourths of those who can afford it give much 
higher prices than necessary for the things they consume; while the 
poor often do the same from ignorance and defect of judgment, want 
of time for searching and making inquiry, and not infrequently from 
coercion, open or disguised. 

In all reasoning about prices, the proviso must be understood, 
"supposing all parties to take care of their own interest." Inatten- 
tion to these distinctions has led to improper applications of the 
abstract principles of political economy, and still of tener to an undue 
discrediting of those principles, through their being compared with a 
different sort of facts from those which they contemplate, or which 
can fairly be expected to accord with them. 

That a thing may have any value in exchange, two conditions 
are necessary. It must be of some use; that is, it must conduce to 
some purpose, satisfy some desire. No one will pay a price, or part 



PRINCIPLES OF VALUE AND PRICE 417 

with anything which serves some of his purposes, to obtain a thing 
which serves none of them. But, secondly, the thing must not only 
have some utility, there must also be some difficulty in its attainment. 
The utility of a thing in the estimation of the purchaser is the 
extreme limit of its exchange value: higher the value cannot ascend; 
peculiar circumstances are required to raise it so high. This topic is 
happily illustrated by Mr. De Quincey. 

Walk into almost any possible shop, buy the first article you see; what 
will determine its price ? In the ninety-nine cases out of a hundred, simply 
the element D — difficulty of attainment. The element U, or intrinsic 
utility, will be perfectly inoperative. Let the thing (measured by its uses) 
be, for your purposes, worth ten guineas, so that you would rather give 
ten guineas than lose it ; yet . if the difficulty of producing it be only worth 
one guinea, one guinea is the price which it will bear. But still, not the less, 
though U is inoperative, can U be supposed absent? By no possibility; 
for, if it had been absent, assuredly you would not have bought the article 
even at the lowest price.* U acts upon you, though it does not act upon 
the price. 

The difficulty of attainment which determines value is not always 
the same kind of difficulty. It sometimes consists in an absolute 
limitation of the supply. There are things of which it is physically 
impossible to increase the quantity beyond certain narrow limits. 
Such are those wines which can be grown only in peculiar circum- 
stances of soil, climate, and exposure. Such also are ancient sculp- 
tures; pictures by the old masters; rare books or coins, or other 
articles of antiquarian curiosity. 

But there is another category (embracing the majority of all 
things that are bought and sold) in which the obstacle to attainment 
consists only in the labour and expense requisite to produce the 
commodity. Without a certain labour and expense it cannot be had: 
but when anyone is willing to incur these, there needs be no limit to 
the multiplication of the product. If there were labourers enough 
and machinery enough, cotton, woolens, or linens might be produced 
by thousands of yards for every single yard now manufactured. 

There is a third case, intermediate between the two preceding, 
and rather more complex, which I shall at present merely indicate, 
but the importance of which in political economy is extremely great. 
There are commodities which can be multiplied to an indefinite extent 
by labour and expenditure, but not by a lixed amount of labour and 
expenditure. Only a limited quantity can be produced at a given 



418 AGRICULTURAL ECONOMICS 

cost; if more is wanted, it must be produced at a greater cost. To 
this class, as has been often repeated, agricultural produce belongs, 
and generally all the rude produce of the earth ; and this peculiarity- 
is a source of very important consequences, one of which is the 
necessity of a limit to population, and another, the payment of rent. 

First, of things absolutely limited in quantity, it is commonly 
said that their value depends upon their scarcity. Others say, with 
somewhat greater precision, that the value depends on the demand 
and the supply. But what is meant by demand? Not the mere 
desire for the commodity. A beggar may desire a diamond; but his 
desire, however great, will have no influence on the price. Writers 
have, therefore, distinguished the wish to possess, combined with the 
power of purchasing, and call it effectual demand. It is then said that 
the value depends upon the ratio between the effectual demand and 
the supply. 

But again, the quantity demanded is not a fixed quantity, even 
at the same time and place — it varies according to the value; if the 
thing is cheap, there is usually a demand for more of it than when it 
is dear. The demand, therefore, partly depends on the value. But 
it was before laid down that the value depends on the demand. From 
this contradiction how shall we extricate ourselves ? How solve the 
paradox of two things each depending upon the other ? 

Meaning, by the word "demand," the quantity demanded, and 
remembering that this is not a fixed quantity, but in general varies 
according to the value, let us suppose that the demand at some par- 
ticular time exceeds the supply; that is, there are persons ready to 
buy, at the market value, a greater quantity than is offered for sale. 
Competition takes place on the side of the buyers, and the value 
rises: but how much? In the ratio (some may suppose) of the 
deficiency: if the demand exceeds the supply by one- third, the value 
rises one- third. By no means; for when the value has risen one- 
third, the demand may still exceed the supply; there may, even at 
that higher value, be a greater quantity wanted than is to be had; 
and the competition of buyers may still continue. If the article is a 
necessary of life, which, rather than resign, people are willing to pay 
for at any price, a deficiency of one-third may raise the price to double, 
triple, or quadruple. Or, on the contrary, the competition may cease 
before the value has risen in even the proportion of the deficiency. 
A rise, short of one-third, may place the article beyond the means 
or beyond the inclinations of purchasers to the full amount. At 






PRINCIPLES OF VALUE AND PRICE 419 

what point, then, will the rise be arrested ? At the point, whatever 
it be, which equalizes the demand and the supply: at the price which 
cuts off the extra third from the demand, or brings forward additional 
sellers sufficient to supply it. When, in either of these ways, or by a 
combination of both, the demand becomes equal and no more than 
equal to the supply, the rise of value will stop. 

The converse case is equally simple. Instead of a demand beyond 
the supply, let us suppose a supply exceeding the demand. The 
competition will now be on the side of the sellers : the extra quantity 
can only find a market by calling forth an additional demand equal 
to itself. This is accomplished by means of cheapness; the value 
falls, and brings the article within the reach of more numerous cus- 
tomers, or induces those who were already consumers to make 
increased purchases. The fall of value required to re-establish equality 
is different in different cases. The kinds of things in which it is com- 
monly greatest are at the two extremities of the scale — absolute 
necessaries, or those peculiar luxuries the taste for which is confined 
to a small class. In the case of food, as those who have already enough 
do not require more on account of its cheapness, but rather expend 
in other things what they save in food, the increased consumption 
occasioned by cheapness carries off, as experience shows, only a small 
part of the extra supply caused by an abundant harvest; and the fall 
is practically arrested only when the farmers withdraw their corn, and 
hold it back in hopes of a higher price; or by the operations of specu- 
lators who buy corn when it is cheap and store it up to be brought 
out when more urgently wanted. Whether the demand and supply 
are equalized by an increased demand, the result of cheapness, or 
by withdrawing a part of the supply, equalized they are in either 
case. 

Thus we see that the idea of a ratio, as between demand and 
supply, is out of place, and has no concern in the matter: the proper 
mathematical analogy is that of an equation. Demand and supply, 
the quantity demanded and the quantity supplied, will be made 
equal. If unequal at any moment, competition equalizes them, and 
the manner in which this is done is by an adjustment of the value. 
If the demand increases, the value rises ; if the demand diminishes, the 
value falls: again, if the supply falls off, the value rises; and falls, if 
the supply is increased. The rise or the fall continues until the 
demand and supply. are again equal to one another: and the value 
which a commodity will bring, in any market, is no other than the 



420 AGRICULTURAL ECONOMICS 

value which, in that market, gives a demand just sufficient to carry 
off the existing or expected supply. 

Again, though there are few commodities which are at all times 
and forever unsusceptible of increase of supply, any commodity what- 
ever may be temporarily so; and with some commodities this is 
habitually the case. Agricultural produce, for example, cannot be 
increased in quantity before the next harvest; the quantity of corn 
already existing in the world is all that can be had for sometimes a 
year to come. During that interval, corn is practically assimilated 
to things of which the quantity cannot be increased. In the case of 
most commodities it requires a certain time to increase their quantity; 
and if the demand increases, then, until a corresponding supply can 
be brought forward — that is, until the supply can accommodate itself 
to the demand — the value will so rise as to accommodate the demand 
to the supply. 

When the production of a commodity is the effect of labour and 
expenditure, whether the commodity is susceptible of unlimited mul- 
tiplication or not, there is a minimum value which is the essential 
condition of its being permanently produced. The value at any par- 
ticular time is the result of supply and demand; and is always that 
which is necessary to create a market for the existing supply. But 
unless that value is sufficient to repay the cost of production, and to 
afford, besides, the ordinary expectation of profit, the commodity will 
not continue to be produced. The cost of production, together with 
the ordinary profit, may therefore be called the necessary price, or 
value, of all things made by labour and capital. Nobody willingly 
produces in the prospect of loss. Whoever does so, does it under a 
miscalculation, which he corrects as fast as he is able. 

When a commodity is not only made by labour and capital, but 
can be made by them in indefinite quantity, this necessary value, the 
minimum with which the producers will be content, is also, if compe- 
tition is free and active, the maximum which they can expect. If the 
value of a commodity is such that it repays the cost of production not 
only with the customary but with a higher rate of profit, capital 
rushes to share in this extra gain, and by increasing the supply of the 
article reduces its value. This is not a mere supposition or surmise, 
but a fact familiar to those conversant with commercial operations. 

Adam Smith and Ricardo have called that value of a thing which 
is proportional to its cost of production its natural value (or its natural 
price). They meant by this the point about which the value oscil- 



I PRINCIPLES OF VALUE AND PRICE 421 

lates, and to which it always tends to return; the center value, 
toward which, as Adam Smith expresses it, the market value of a 
thing is constantly gravitating; and any deviation from which is but 
a temporary irregularity, which, the moment it exists, sets forces in 
motion tending to correct it. On an average of years sufficient to 
enable the oscillations on one side of the central line to be compen- 
sated by those on the other, the market value agrees with the natural 
value; but it very seldom coincides exactly with it at any particular 
time. The sea everywhere tends to a level, but it never is at an 
exact level; its surface is always ruffled by waves, and often agitated 
by storms. It is enough that no point, at least in the open sea, is 
permanently higher than another. Each place is alternately elevated 
and depressed; but the ocean preserves its level. 

Every commodity of which the supply can be indefinitely increased 
by labour and capital, exchanges for other things proportionally to the 
cost necessary for producing and bringing to market the most costly 
portion of the supply required. The natural value is synonymous 
with the cost value, and the cost value of a thing means the cost value 
of the most costly portion of it. 

133. UTILITY AND THE DEMAND SCHEDULE 1 
By ALFRED MARSHALL 

"Utility" and "want" are taken as correlative terms. The 
utility of a thing to a person at a time is measured by the extent to 
which it satisfies his wants. Each several want is limited, and with 
every increase in the amount of a thing which a man has the eagerness 
of his desire to obtain more of it diminishes; until it yields place to 
the desire for some other thing, of which perhaps he hardly thought 
so long as his more urgent wants were still unsatisfied. There is an 
endless variety of wants, but there is a limit to each separate want. 
This familiar and fundamental tendency of human nature may be 
stated in the law of satiable wants or of diminishing utility thus : 

The total utility of a thing to anyone (that is, the total pleasure 
or other benefit it yields him) increases with every increase in his 
stock of it, but not as fast as his stock increases. If his stock of it 
increases at a uniform rate the benefit derived from it increases at a 
diminishing rate. In other words, the additional benefit which a 

1 Adapted from Principles of Economics, I, 167-S3. Copyright by Mannillan 
& Co., Ltd., London. Used by permission of the publishers. 



422 AGRICULTURAL ECONOMICS 

person derives from a given increase of hi? stock of a thing diminishes 
with every increase in the stock that he already has. 

That part of the thing which he is only just induced to purchase 
may be called his marginal purchase, because he is on the margin of 
doubt whether it is worth his while to incur the outlay required to 
obtain it. And the utility of his marginal purchase may be called the 
marginal utility of the thing to him. Or, if instead of buying it he 
makes the thing himself, then its marginal utility is the utility of 
that part which he thinks it only just worth his while to make. And 
thus the law just given may be worded: 

The marginal utility of a thing to anyone diminishes with every 
increase in the amount of it he already has, supposing no time to be 
allowed for any alteration in the character or tastes of the man him- 
self. It is therefore no exception to the law that the more good music 
a man hears, the stronger is his taste for it likely to become; that 
avarice and ambition are often insatiable; or that the virtue of cleanli- 
ness and the vice of drunkenness alike grow on what they feed upon. 
For in such cases our observations range over some period of time; 
and the man is not the same at the beginning as at the end of it. If 
we take a man as he is, without allowing time for any change in his 
character, the marginal utility of a thing to him diminishes steadily 
with every increase in his supply of it. 

Now let us translate this law of diminishing utility into terms of 
price. Let us take an illustration from the case of a commodity, such 
as tea, which is in constant demand and which can be purchased in 
small quantities. Suppose, for instance, that tea of a certain quality 
is to be had at 2s. per pound. A person might be willing to give 10s. 
for a single pound once a year rather than go without it altogether; 
while if he could have any amount of it for nothing he would perhaps 
not care to use more than 30 pounds in the year. But as it is, he buys 
perhaps 10 pounds in the year; that is to say, the difference between 
the happiness which he gets from buying 9 pounds and 10 pounds is 
just enough for him to be willing to pay 2s. for it, while the fact that 
he does not buy an eleventh pound, shows that he does not think that 
it would be quite worth an extra 2s. to him. That is, 2s. a pound 
measures the utility to him of the tea which lies at the margin or 
terminus or end of his purchases; it measures the marginal utility to 
him. If the price which he is just willing to pay for any pound be 
called his demand price, then 2s. is his marginal demand price. 
And our law may be worded: 



PRINCIPLES OF VALUE AND PRICE 423 

An increase in the amount of a thing that a person has will, other 
things being equal (i.e., the purchasing power of money, and the 
amount of money at his command being equal), diminish the price 
which he will pay for a little more of it ; or in other words diminishes 
his marginal demand price for it. 

His demand becomes efficient, only when the price which he is will- 
ing to offer reaches that at which others are willing to sell. 

This last sentence reminds us that we have as yet taken no account 
of changes in the marginal utility of money, or general purchasing 
power. At one and the same time, a person's material resources being 
unchanged, the marginal utility of money to him is a fixed quantity, 
so that the prices he is just willing to pay for two commodities are to 
one another in the same ratio as the utility of those two commodities. 

A greater utility will be required to induce him to buy a thing if 
he is poor than if he is rich. We have seen how the clerk with 100 
pounds a year will walk to business in a heavier rain than the clerk 
with 300 pounds a year. But although the utility, or the benefit, that 
is measured in the poorer man's mind by sixpence is greater than that 
measured by it in the richer man's mind; yet if the richer man rides 
a hundred times in the year and the poorer man twenty times, then 
the utility of the hundredth ride which the richer man is only just 
induced to take is measured to him by sixpence. For each of them 
the marginal utility is measured by sixpence; but this marginal 
utility is greater in the case of the poorer man than in that of the 
richer. 

Hn other words, the richer a man becomes the less is the marginal 
utility of money to him; every increase in his resources increases the 
price which he is willing to pay for any given benefit. And in the 
same way every diminution of his resources increases the marginal 
utility of money to him, and diminishes the price that he is willing to 
pay for any benefit. 

When, then, we say that a person's demand for anything increases, 
we mean that he will buy more of it than he would before at the same 
price, and that he will buy as much of it as before at a higher price. 
To complete our knowledge of his demand for it, we should have to 
ascertain how much of it he would be willing to purchase at each of 
the prices at which it is likely to be offered; and the circumstance of 
his demand for, say, tea can be best expressed by a list of the prices 
which he is willing to pay; that is, by his several demand prices for 
different amounts of it. (This list may be called his demand schedule.) 



424 AGRICULTURAL ECONOMICS 

Thus, for instance, we may find that he would buy 
6 lbs. at 50^. per lb. 10 lbs. at 24^. per lb. 



7 


u 


" 40 


u u 


II 


u 


" 21 


a u 


8 


a 


" 33 


u u 


12 


u 


" 19 


a a 


9 


a 


" 28 


i( u 


13 


u 


" 18 


a a 



If corresponding prices were filled in for all intermediate amounts 
we should have an exact statement of his demand. 

We cannot express a person's demand for a thing by the amount he 
is willing to buy, or by the " intensity of his eagerness to buy a certain 
amount," without reference to the prices at which he would buy that 
amount and other amounts. We can represent it exactly only by 
lists of the prices at which he is willing to buy different amounts. 

So far we have looked at the demand of a single individual. And 
in the particular case of such a thing as tea the demand of a single 
person is fairly representative of the general demand of a whole 
market: for the demand for tea is a constant one; and, since it can 
be purchased in small quantities, every variation in its price is likely 
to affect the amount which he will buy. But even among those things 
which are in constant use there are many for which the demand on the 
part of any single individual cannot vary continuously with every 
small change in price, but can move only by great leaps. For instance, 
a small fall in the price of hats or watches will not affect the action of 
everyone; but it will induce a few persons, who were in doubt whether 
or not to get a new hat or a new watch, to decide in favor of doing so. 

In their broad results the variety and the fickleness of individual 
action are merged in the comparatively regular aggregate of the action 
of many. In large markets, then — where rich and poor, old and 
young, men and women, persons of all varieties of tastes, tempera- 
ments, and occupations are mingled together — the peculiarities in the 
wants of individuals will compensate one another in a comparatively 
regular gradation of total demand. 

There is then one general law of demand, viz., that the greater the 
amount to be sold, the smaller will be the price at which it will find 
purchasers; or, in other words, that the amount demanded increases 
with a fall in price, and diminishes with a rise in price. There will 
not be any exact relation between the fall in price and the increase 
of demand. A fall of one-tenth in the price may increase the sales 
by a twentieth or by a quarter, or it may double them. But as the 
numbers in the left-hand column of the demand schedule increase, 
those in the right-hand column will always diminish. 



PRINCIPLES OF VALUE AND PRICE 425 

We have seen that the only universal law as to a person's desire 
for a commodity is that it diminishes, other things being equal, with 
every increase in his supply of that commodity. But this diminution 
may be slow or rapid. If it is slow, the price that he will give for the 
commodity will not fall much in consequence of a considerable increase 
in his supply of it; and a small fall in price will cause a comparatively 
large increase in his purchases. But if it is rapid, a small fall in price 
will cause only a very small increase in his purchases. In the former 
case his willingness to purchase the thing stretches itself out a great 
deal under the action of a small inducement: the elasticity of his 
wants, we may say, is great. In the latter case the extra inducement 
given by the fall in price causes hardly any extension of his desire to 
purchase: the elasticity of his demand is small. 

And as with the demand of one person, so with that of a whole 
market. The elasticity of demand in a market is great or small accord- 
ing as the amount demanded increases much or little for a given fall 
in price and diminishes much or little for a given rise in price. 

The case of necessaries is exceptional. When the price of wheat 
is very high, and again when it is very low, the demand has very little 
elasticity: at all events if we assume that wheat, even when scarce, 
is the cheapest food for man; and that, even when most plentiful, 
it is not consumed in any other way. We know that a fall in the price 
of the quartern loaf from 6d. to 4J. has scarcely any effect in increasing 
the consumption of bread. With regard to the other end of the scale 
it is more difficult to speak with certainty, because there has been no 
approach to a scarcity in England since the repeal of the corn laws. 
But, availing ourselves of the experience of a less happy time, we may 
suppose that deficits in the supply of 1, 2, 3, 4, or 5 tenths would cause 
a rise in price of 3, 8, 16, 28, or 45 tenths, respectively. Much greater 
variations in prices indeed than this have not been uncommon. Thus 
wheat sold in London for ten shillings a bushel in 1335, but in the 
following year it sold for ten pence. 

There may be even more violent changes than this in the price of 
a thing which is not necessary, if it is perishable and the demand for 
it is inelastic: thus fish may be very dear one day, and sold for manure 
two or three days later. 

Water is one of the few things the consumption of which we are 
able to observe at all prices, from the very highest down to nothing 
at all. At moderate prices the demand for it is very clastic. But 
the uses to which it can be put are capable of being completely filled, 



426 AGRICULTURAL ECONOMICS 

and as its price sinks toward zero the demand for it loses its elasticity. 
Nearly the same may be said of salt. Its price in England is so low 
that the demand for it as an article of food is very inelastic; but in 
India the price is comparatively high and the demand is comparatively 
elastic. 

The demand for things of a higher quality depends much on sen- 
sibility: some people care little for a refined flavour in their wine 
provided they can get plenty of it; others crave a high quality, but 
are easily satiated. In the ordinary working class districts the 
inferior and the better joints are sold at nearly the same price, but 
some well-paid artisans in the north of England have developed a 
liking for the best meat, and will pay for it nearly as high a price as 
can be got in the west end of London, where the price is kept arti- 
ficially high by the necessity of sending the inferior joints away for 
sale elsewhere. Use also gives rise to acquired distastes as well as 
to acquired tastes. Illustrations which make a book attractive to 
many readers will repel those whose familiarity with better work has 
rendered them fastidious. A person of high musical sensibility in a 
large town will avoid bad concerts, though he might go to them 
gladly if he lived in a small town, where no good concerts are to be 
heard, because there are not enough persons willing to pay the high 
price required to cover their expenses. The effective demand for 
first-rate music is elastic only in large towns; for second-rate music 
it is elastic in both large and small towns. 

Generally speaking, those things have the most elastic demand 
which are capable of being applied to many different uses. Water, 
for instance, is needed, first as food, then for cooking, then for washing 
of various kinds, and so on. When there is no special drought, but 
water is sold by the pailful, the price may be low enough to enable 
even the poorer classes to drink as much of it as they are inclined, 
while for cooking they sometimes use the same water twice over, and 
they apply it very scantily in washing. The middle classes will per- 
haps not use any of it twice for cooking; but they will make a pail 
of water go a good deal farther for washing purposes than if they had 
an unlimited supply at command. When water is supplied by pipes, 
and charged at a very low rate by meter, many people use as much 
of it even for washing as they feel at all inclined to do ; and when the 
water is supplied not by meter but at a fixed annual charge, and is 
laid on in every place where it is wanted, the use of it for every pur- 
pose is carried to the full satiety limit. 






PRINCIPLES OF VALUE AND PRICE 427 

134. CONDITIONS OF SUPPLY 1 
By F. W. TAUSSIG 

In both of these statements of the principle of market value — the 
older one of an equation and the newer one of the marginal utility of 
supply — the underlying assumption is that a fixed quantity is put on 
the market. But is this assumption tenable? Does it conform to 
the usual state of facts? We have just said that demand, in the 
sense of quantity demanded, is not independent of price. Is not the 
same true of supply ? In the ordinary case it is hardly accurate to 
say that the quantity offered in the market is fixed, and is independent 
of price. As price goes higher, more sellers will be tempted to offer 
their wares, and supply will become larger. As prices go lower, 
supply will become smaller. Must not the theory of market value 
be adjusted to variable supply as well as to variable demand ? 

It is true that in some instances the supposition of a fixed supply 
is clearly in accord with the facts. When a large crop of strawberries 
comes on the market it must be disposed of once for all. There is 
no keeping back any part of the supply of a perishable commodity. 
The total quantity on hand must be disposed of for what it will fetch — 
for the marginal price. Not very long ago the list of commodities 
of this kind was a large one; it included fresh fish, all vegetables and 
fruits, even meat. But modern improvements for the preservation 
of most such things, through cold storage and canning, has greatly 
shortened the list. Most commodities are not put on sale with head- 
long suddenness. They are offered in installments. They come into 
the market in a flow or stream, not as an abruptly offered stock. The 
rate at which they come in, and the amount which will be offered at 
any given time, depend on the price. A higher price quickens the 
flow and leads to larger supply; a lower price checks the flow. 

It is not difficult to adjust the theory of market value to the case 
of variable supply. On Fig. 4, let SS' represent the conditions of a 
supply that varies with price, becoming greater as price rises and 
smaller as price falls. Here, as on the previous figures, quantities are 
measured horizontally along the axis OX or parallel to it, and prices 
perpendicularly along the axis OY or parallel to it. At the price SA, 
we may suppose the quantity OA to be forthcoming on the market. 
As the price rises, the quantity increases. At the price PP\ the 

1 Adapted from Principles of Economics, I, 144-50, 170-71, 180-85, 189-91. 
(Copyright by the Macmillan Co.) 



428 



AGRICULTURAL ECONOMICS 




quantity offered is OP' ; at the price S'A', the quantity offered is OA'. 
Evidently the line SPS' , which is the supply curve, has an upward 
inclination, the reverse of the inclination of the demand curve DD' '. 
A rise in price, which causes the quantity demanded to become less, 
causes the quantity offered to become greater. 

The supply and demand curves, moving in opposite directions, 
must meet; and in our figure they meet at P. The price PP' is the 
equilibrium price, the market price fixed by the play of varying supply 

and demand. At that point the 
quantity offered is equal to the 
quantity demanded: the equation is 
satisfied. If a higher price is asked, 
the quantity demanded will be less 
and the quantity offered will be 
greater. Sellers will put on the 
market more than buyers will take; 
price will fall; some sellers will then 
withdraw and some buyers will come 
in, until equilibrium is reached. And 
so in the reverse case: at any lower 
price, some sellers will withdraw, some buyers will be tempted 
in, and readjustment will again bring the price to the point of 
equilibrium, PP' . 

It has just been said that of these two modes of statement — the 
one proceeding on the supposition of a fixed supply, the other on that 
of a variable supply — the second is more in accord with the facts. 
Yet the first also is so in accord. Both must be had in mind for an 
understanding of the course of prices in a market. 

On any given day, in a well-organized market, the actual settle- 
ment of market price undoubtedly takes place through an adjustment 
of supply as well as through a response from demand. On the cotton 
exchange or the produce exchange, or in any place where brokers and 
dealers meet, a process of higgling and bargaining goes on. More or 
less of the article is offered and demanded, with fluctuations in prices 
which are usually within narrow limits on any one day and which 
result in an equilibrium price for that day. But this daily equilibrium 
price is itself affected by an underlying and more important equilib- 
rium price. While the amount which is offered in the market from 
day to day — the supply — varies considerably, and varies in response 
to changes in price, the total amount which can be supplied over a 



PRINCIPLES OF VALUE AND PRICE 429 

larger period usually is fixed. Take, as a typical case, the price of 
cotton, which fluctuates on the exchanges from day to day in response 
to the ever-changing play of offer and demand. The total amount 
of cotton available for the season is not a variable quantity. It is 
so much and no more, depending on the crop of that season. .The 
price at which the whole will be disposed of depends on its marginal 
utility or on the equation of supply and demand (whichever mode of 
statement be preferred) and is the outcome of a total supply which is 
fixed. The fluctuations in price from day to day oscillate about this 
seasonal equilibrium price. 

Still using the cotton market and cotton prices for examples, we 
may note that, while the supply for the season is fixed, no one knows 
in advance with certainty just how great that supply is; still less at 
what price the supply, even if accurately known, would be disposed 
of. Hence a period of uncertainty, of rumors and guesses, of selling 
and buying by brokers and dealers and manufacturers, by anyone 
who chooses to operate on the cotton market — in short, all the 
phenomena of speculation. Cotton in the United States (the crop in 
this country dominates the world-markets) is picked in the autumn 
and the amount harvested is known by December 1. But throughout 
the summer months there are reports of the condition of the growing 
plants, which foreshadow, though with uncertainty, the amount of 
the coming crop. During the picking season more and more certainty 
is reached. Finally, under modern methods of gathering such 
information, the amount comes to be accurately known. Then arises 
the question to what degree the price will be affected by the amount. 
It is certain that a small crop will command a higher price, a large 
crop a smaller price. But the conditions of demand or consumption 
are fluctuating from year to year, no less than the supply from the 
crops. Just what will be the seasonal equilibrium price for a crop 
of a given size no one can say in advance. It is reached by a succes- 
sion of tentative market prices. From day to day, and from month 
to month, the market price is settled by the adjustment of variable 
amounts offered in the market by dealers. For the season, it is 
settled by the adjustment of a fixed supply to the marginal price at 
which the whole will be disposed of. 

It is not to be supposed that even on a single day is there one 
price rigidly settled by the equilibrium of demand and supply. Even 
in the most nighly organized markets there may be simultaneous sales 
at different prices; and, where there are newly discovered conditions 



43© AGRICULTURAL ECONOMICS 

affecting the seasonal range, such as a crop report, there may be con- 
siderable fluctuations in the course of a day. These oscillations give 
the opportunity to the astute bargainer. Some buyers, not cool- 
headed enough to bide their time, will pay more than the equilibrium 
price. On the other hand, some sellers, unduly anxious lest their 
supplies be left on their hands, will sell at less. The shrewd and 
unexcitable person, carefully watching the course of dealings, may 
buy at one price from the overeager sellers and sell on the same day 
at a profit to overeager buyers. 

What is true of cotton holds of other agricultural commodities, 
whose supply also is settled by the crops of each season: of wheat, 
corn, and other grains, of hay, flax and hemp, hops, sugar, tea, coffee. 
There is always a seasonal price, around which fluctuate the market 
prices for shorter periods. Virtually this holds of other commodities 
also. It is true that agricultural commodities show more unmistak- 
ably than most others the temporary fixation of supply. The supply 
of manufactured commodities changes more smoothly and continu- 
ously. The amounts offered in the market can often be increased 
and diminished without waiting for nature's processes of growth. 
But even here there are important limitations. For any given period 
of moderate length — a half-year or a year — there is something like a 
fixed supply. 

VALUE AND COST OF PRODUCTION 

I. In the preceding discussion of demand and supply and of 
market value, an absolutely fixed supply was assumed at the outset. 
Let now the other extreme be assumed, a supply absolutely flexible. 
Suppose a commodity produced, under the simplest conditions, by a 
large number of persons. Suppose that all these persons are com- 
peting with each other; that any one of them can easily engage in 
producing the commodity, and as easily withdraw from producing it. 
Suppose all to be carrying on operations under the same conditions, 
no one of them producing more cheaply than another. Such a com- 
modity would be brought to market under conditions of constant cost, 
and would be sold at a price conforming to that cost. At any moment 
its value would indeed be determined directly by its quantity — that 
is, by marginal utility. But if its value, so determined, were greater 
than its cost, more persons would be led to engage in its production, 
supply would increase, and value would fall. If its value at any time 
were less than its cost, some persons would withdraw from its pro- 
duction, supply would decrease, and value would rise. The greater 






PRINCIPLES OF VALUE AND PRICE 



431 




the ease of entering on the industry and of withdrawing from it, the 
more rapid and certain would be the adjustment of supply to that 
amount which would just sell at cost price. If perfect flexibility in 
supply be assumed, the adjustment of value to cost would be 
perfect, and the article would always sell for just what it cost to 
produce it. 

II. Let us suppose now that the several producers who compete 
with each other in putting a given article on the market have not the 
same facilities; that for some of them the expenses of production are 
greater than for others. We need v 
not concern ourselves for the present 
with the question why there are such 
differences. Let us assume them to 
exist and consider what consequences 
follow. 

The situation is illustrated by 
the diagram (Fig. 6). The condi- 
tions of demand are again indicated 
by the descending line DD f . The 
conditions of supply are indicated by 
the rising line SS ' . The varying 
distance from the horizontal axis OX to the line SS f measures the 
varying cost of different installments of the supply. Some producers 
— those most favorably equipped — can put the commodity on the 
market at the comparatively low cost OS. Perhaps a certain moder- 
ate quantity can be so produced at constant cost. If the conditions 
of demand were such that only this moderate quantity were wanted 
at the constant cost price — if the demand curve were to intersect the 
supply curve somewhere near S — the normal price would be OS. So 
far the case would be identical with that studied in the preceding 
chapter. But now the conditions of demand, as indicated by the line 
DD f , are such that a much greater quantity is wanted at the price 
OS than can be furnished at that price. The supply put on the 
market increases, but as it increases, additional installments can no 
longer be produced at the cost OS. With the quantity OA, for 
example, the cost of the last installment reaches AA f . As more is 
produced, cost still increases, indicated by the continuing ascent of 
the supply curve from A' to P' '. At P' finally the demand curve is 
met. At the price BP' ( = OP) the quantity OB can be disposed of. 
Equilibrium is established; the quantity demanded equals the quan- 
tity supplied; and price settles at the amount BP'. 



432 AGRICULTURAL ECONOMICS 

The whole supply will be sold at the price OP ( = BP') ; and the 
selling value of the whole, i.e., the quantity multiplied by the price, 
will be indicated by the rectangle OPP'B. It is true that the more 
fortunate producers could sell the commodity to advantage at a less 
price. At the price OS or A A' they would still find it worth while 
to bring it to market. But the total quantity which will meet the 
demand at an equilibrium price cannot be supplied unless producers 
less fortunate contribute their quota. These will not do so unless 
they get their higher cost price BP'. At that price the whole supply 
will be disposed of. The more favorably situated producers will get 
the price necessary to induce their rivals, who have poorer facilities, 
to contribute to the supply. 

We may speak of the producers at B, whose cost of production 
is BP f , as the marginal producers. Their cost price is also the measure 
of the marginal utility of the commodity. Marginal cost and mar- 
ginal utility thus coincide; and when they coincide there is equilib- 
rium. If the quantity supplied should increase beyond B, in the 
direction of F, marginal utility would be less, and marginal cost 
would be greater. Supply could not long be maintained beyond 
the point B, for producers would then be receiving less than cost. 
So long as the conditions of demand and supply remained as 
indicated by the lines DD' or SS', price would settle at the 
amount BP' . 

The relation of demand and supply to value is somewhat different 
here from what it was in the cases discussed above. Where the 
supply of a commodity is fixed, the value of it is settled by the con- 
ditions of demand; that is, by the marginal utility of that supply. 
Where, on the other hand, the cost of a freely produced commodity 
is fixed, the value of the commodity is settled by the conditions of 
supply; that is, by cost. Demand in this case determines, in the long 
run, only the quantity which shall be put on the market. But in the 
case now under consideration, the conditions of demand and of supply 
both have a permanent influence in settling price. As the quantity 
shifts, not only does marginal utility vary, but marginal cost. A 
lessening of demand would not only lessen the quantity put on the 
market, but would also lessen marginal cost. Conversely, an increase 
of demand would not only cause more to be put on the market, but 
would also raise normal price, since the additional quantity would be 
produced at greater cost. Hence demand and supply — marginal utility 
and cost — mutually determine normal price. 



PRINCIPLES OF VALUE AND PRICE 433 

The economist who has best set forth the general theory of value, 
Professor Marshall, has ingeniously compared the influence of demand 
and supply to the working of a pair of scissors. If one blade of a pair 
of scissors is held still, and the other moves, we may say that the 
second does the cutting. Yet it could not cut unless the other blade 
were there. So when supply is fixed, we may say that demand settles 
value; yet it does so only because supply is there and does not move. 
When cost is constant, we may say that cost settles value. Yet it 
does so only because there is a demand for the commodity, and 
because supply readily adjusts itself to the amount which will be 
demanded at the cost price. If cost is variable in the manner dis- 
cussed in the present chapter, both supply and demand — both cost 
and utility — exercise a mutual influence on normal price. Both blades 
of the. scissors are in motion. All the various manifestations of value 
(under the conditions of an advanced division of labor and of exchange 
flowing from that division) can be analyzed as interactions of supply 
and demand. Neither can be said to settle value independently of 
the other. 

The differences in advantage between producers may be due to 
permanent or to temporary causes. According as they are temporary 
or permanent, they are of very different significance for the theory of 
value and for the welfare of society. 

Differences of a temporary sort are the most common. They are 
so common that they may be said in one sense to be universal. As 
indicated in the last chapter, it probably never happens in commu- 
nities familiar to us that all those engaged in a given industry are 
carrying on their operations in the same way. Some have better 
plant, better organization, better location, than others; can bring 
their products to market at less expense; and, selling at the same 
price, can reap larger gains. 

But these differences, if their causes are not permanent, tend 
constantly to disappear. If one man has better plant or machinery 
than another, and if there be no permanent reason why the second 
should not also set up the better outfit, he is likely sooner or later to 
do so. If he does not do so, he is likely to be driven out of the market. 
Others will adopt the more effective method of production, will 
increase the quantity they put on the market, and will be able to 
undersell him without foregoing a profit. Where the methods of 
cheapened production are open to all, they are sure sooner or later 
to be adopted by all. 



434 



AGRICULTURAL ECONOMICS 




Fig. 7 



The situation is otherwise where there are permanent causes of 
difference between producers. Then cost at the hands of the mar- 
ginal producer does settle the long-run price. The point about which 
oscillations range, and to which price tends to conform, is cost for 
the least advantageous producer. Without him, the total supply 
connot be enlarged to the point at which there is an equilibrium of 
normal supply and demand. If there were no limit to the amount 
which the more advantageous producers could bring to market — if 

this fortunate set of producers could 
increase the output indefinitely at 
constant cost — the marginal producer 
would be driven out and the condi- 
tions would be those of constant cost. 
There being such a limit, he must be 
called on for the maintenance of 
supply, and there must be in the 
long run a price which will make it 
worth his while to contribute. Value 
is then determined in the long run 
by cost to the marginal producer; 
but at what point in the varying scale of costs that producer will 
be, depends on the conditions of demand. 

III. We turn now to the reverse conditions, those of diminishing 
cost or increasing returns. Suppose that, as additional supplies of a 
commodity are produced, the cost of each unit becomes, not greater, 
but less. Such a tendency is represented in Fig. 7, where the line 
SS', indicating the conditions of supply, has a downward slope. The 
line DD', representing the conditions of demand, necessarily has a 
downward slope, indicating the diminishing utility of successive 
increments. Equilibrium will be reached at the point where the two 
curves meet, at P' . At that point the quantity brought to market 
sells at the price BP', which equals its cost of production. The total 
quantity put on the market will normally be OB, and its total selling 
price will be OPP'B. 

It is to be observed that this figure represents a situation different 
in essential respects from that represented in Fig. 6 in the preceding 
discussion. In that case some among the competing producers were 
supposed to contribute to the supply at less cost than others. They 
reaped a producer's surplus. In the present case, however, all pro- 
ducers are on the same plane; all have the advantage of lessening cost 



PRINCIPLES OF VALUE AND PRICE 435 

and increasing returns. No portion of the supply continues to be pro- 
duced at a cost different from the marginal cost. With the supply 
OB, for example, the cost per unit of the commodity is BP' for each 
and every producer. If for any reason the supply should be reduced, 
cost for each unit would be greater. Suppose, for example, that 
demand should decline, the demand curve shifting to the left, to dd' } 
so as to intersect the supply curve at A'. The quantity normally 
supplied would then be OA, selling at the price A A' '. All producers 
would find their cost per unit higher than when the quantity supplied 
was OB; for A A' is greater than BP'. But at neither price would 
there be differences between producers. Total cost and total selling 
value in either case would be represented by parallelograms; at the 
price A A' by the area OAA'C, and at the price BP' by the area OPP'B. 
There is. no such phenomenon as surplus gain to any producer. 

This case differs, again, from that considered previously. There 
the effect of a general lowering of the supply schedule was con- 
sidered, on the supposition that the reduction was due to some 
extraneous cause not directly connected with increase in supply. 
Here the reduction is supposed to be chiefly due to such an increase : 
the mere fact of greater supply brings a decline in cost per unit of 
supply. Cost, uniform for all producers, becomes less for each as 
more is produced. 

All these three cases, on the other hand, are alike, in that long-run 
results are considered. Uniformity of costs, and the automatic decline 
in cost for all producers, with increasing supply, never are found in 
industry. Where the conditions are favorable for a general decline 
in cost, some producers, as we have seen, take advantage of them more 
promptly than others; and so long as this " dynamic" situation con- 
tinues we have a lowering of cost for some producers, but not for all. 
This situation, however, will not endure ; those who do not avail them- 
selves of the improvements are underbid and driven from the market, 
and the " static" state of uniform cost is approached. The case 
would be different if those who had the better facilities were not sub- 
ject to competition from others on even terms, and could not them- 
selves increase their output indefinitely at lower cost. With such a 
limitation to their advantages, we should have precisely the case of 
varying costs, as previously discussed. Here cost is supposed to be 
uniform, but not constant — it becomes less per unit as the number 
of units increases. The long-run result is an interaction of demand 
and supply; both blades of the scissors are cutting. 



436 



AGRICULTURAL ECONOMICS 



135. MONOPOLY PRICE 1 
By HENRY ROGERS SEAGER 

Monopoly means usually in economics such control over the supply 
of an economic good as enables the monopolist to regulate its price. 
Monopolists, so far as they are free to obey the dictates of self- 
interests, tend to fix those prices for their products which will yield 
the largest monopoly profits. Just what this means may be made to 
appear from a simple illustration. 

Consider the case of a patented article in genereal use, like a 
special brand of soap. As a rule, the expense of producing such an 
article diminishes as the number of units produced increases. On the 
other hand, in accordance with the familiar law of demand, as the 
number of units offered for sale is increased the price that can be 
secured for each unit decreases. Suppose that the volume of sales 
at different prices, the expense of production per unit for these different 
quantities sold, and the monopoly profits received are as represented 
in the accompanying table. It is clear from the study of this table 
that, on the conditions assumed, the price that affords the maximum 



Price 
(Cents) 


No. of Cakes 
Sold 


Gross Receipts 


Expense per 
Cake (Cents) 


Gross Expenses 


Profits 


50 

40 

30 

25 

20 

15 

IO 

9 

8 

7 .-• 

6 

5 

4i 


100,000 

130,000 

200,000 

400,000 

600,000 

1,000,000 

2,500,000 

3,000,000 

3,500,000 

4,000,000 

6,000,000 

10,000,000 

14,000,000 


$ 50,000 
52,000 
60,000 
100,000 
120,000 
150,000 
250,000 
270,000 
280,000 
280,000 
360,000 
500,000 
595,000 


12 

II 

IO 

8 

7 
6 

5 
4l 

4f 
4f 
4i 
4f 
4i 


$ 12,000 

14,300 

20,000 

32,000 

42,000 

60,000 

125,000 

145,000 

165,000 

185,000 

270,000 

437,500 

595,000 


$ 38,000 

37,700 

40,000 

68,000 

78,000 

90,000 

125,000 

125,000 

115,000 

95,000 

90,000 

62,500 





monopoly profit will be somewhere between nine and ten cents. 
Until the price, ten cents, is reached, the larger volume of sales and 
diminishing expense per unit more than counterbalance the loss due 
to lowering the price. Below nine cents the loss in price is no longer 
offset by these other factors, although they continue to operate, and 
consequently profits decline. As this table indicates, monopoly price 

1 Adapted from Principles of Economics, pp. 213, 219-20. (Copyright by 
Henry Holt & Co.) 



PRINCIPLES OF VALUE AND PRICE 437 

does not necessarily mean extravagantly high price. In this example 
the price most advantageous to the monopolist is about double the 
expense of production. In actual practice the margin of monopoly 
profit is apt to be even smaller than this except for goods the demand 
for which is quite inelastic. 

When a monopolist enjoys exclusive control of the monopolized 
good, he may fix the price at the point affording the maximum profit 
without fear of exciting competition. But few monopolists are so 
fortunately situated as this implies. Competition, even though not 
in active operation, is an ever-present possibility with which most 
monopolists must reckon. Prudence, therefore, usually dictates a 
more conservative policy in reference to prices in order to protect the 
monopoly from future competition or from possible regulation by the 
government. 



B. The Supply Side of Agricultural Prices 

136. THE EFFECT OF OVERSUPPLY ON PRICE 1 
By C. WOOD DAVIS 

From the close of the Civil War until near the middle of the ninth 
decade, the farmer shared in the nation's prosperity. In more recent 
years, however, this state of thrift has been succeeded by one of 
unremunerative toil, accompanied by much privation. When, as is 
now the case over vast areas, wheat sells at from 40 to 50 cents, oats 
at from 9 to 12 cents, and corn from 10 to 13 cents a bushel, and fat 
cattle from ij to 3 cents a pound, the farmer can indulge in but few 
luxuries. 

During a period of 39 years, ending in 1889, population, farms, 
and the production of the more important staples increased as follows : 

Population 175 per cent 

Number of farms 260 

Cattle 185 

Swine 66 

Bales of cotton 201 

Bushels of corn 257 

Bushels of wheat 389 

Bushels of oats « 411 

1 Adapted from "Why the Farmer Is Not Prosperous," Forum, IX (March, 
1890), 233-41. 



438 AGRICULTURAL ECONOMICS 

As the result of an increase of farms and farm products so out- 
stripping the increase in population, the only staples the growing of 
which is even fairly remunerative are pork and cotton. This is 
accounted for by our monopoly of the world's supply of cotton, and 
by the fact that the number of swine has not kept pace with the 
increase in population; but it does not follow that there is a deficient 
supply of swine, for the number of both swine and cattle was greatly 
in excess of requirements prior to the Civil War. 

Except for brief periods, the prices of cattle continued remunera- 
tive up to the middle of the ninth decade, when the new farms of the 
West, the open range regions of Texas, the plains, and the mountain 
areas furnished a supply far in excess of demands, swamping the mar- 
kets and reducing prices to a level precluding all profit. During 
twenty years the exportation of corn has averaged less than 5 per cent 
of the product, and of oats less than 1 per cent, and the price of these 
grains depends almost wholly upon the home requirements and the 
extent of the supply. That lower prices follow enlarged supply is 
evident; and a medium, or even a short, crop brings the farmer more 
profit, and often more money in gross, than does a full or large one, 
as is clearly shown in Table I, which goes far toward explaining why 
the farmer is not prosperous. To illustrate: the corn crop of 1889 
exceeded that of 1887 by more than 656,000,000 bushels, yet, counting 
the cost of the extra amount handled, it will bring the growers 
$100,000,000 less. Again, the crop of 1878 was 64 per cent greater 
than that of 1874, and, allowance made for cost of handling, brought 
the farmer $149,000,000 less. The five crops of corn grown in the 
second half-decade tabulated exceeded the five crops of the preceding 
period by 2,128,000,000 bushels, yet the farmers netted $71,000,000 
less therefrom. Doubtless a better result would have accrued had 
these 2,128,000,000 bushels been converted into fuel on the farms, as 
is being done with part of the surplus of 1889. 

Covering twenty years of corn-production, Table I shows that in 
the first half-decade somewhat less than one acre of corn, or 24.4 
bushels, per capita, was sufficient to meet all demands. In the second 
half-decade the corn area was increased to 1 . 1 acres per capita, the 
diminishing price indicating that 30.4 bushels for each person was 
more than was needed. This addition to the supply reduced the 
average returns from $13.32 to $10.10 per acre. During the third 
period the area increased to 1.25 acres per capita, the short crop of 
1 88 1 diminishing the per capita supply six- tenths of a bushel. The 



PRINCIPLES OF VALUE AND PRICE 



439 



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440 AGRICULTURAL ECONOMICS 

effect of this one short crop was to advance the average price for the 
five years 21 per cent. In the fourth half-decade there was no change 
in the area per capita, but an addition of seven-tenths of a bushel to 
the per capita supply, and an accumulating surplus of such dimensions 
as to force prices to the lowest point known. The price of corn in the 
home markets, December, 1889, was 11 per cent lower than ever 
before reported. Such has been the effect of the great crop of 1889, 
following one of nearly equal magnitude in 1888. 

The history of American farming for twenty years is, in brief, that 
as the area in cultivation has increased, so has the product per capita, to 
be followed by ever-declining prices and diminishing returns per acre. 

If, in the period ending in 1874, with a cattle supply of 62 to 100 
people, the supply of corn less than 25 bushels per capita, that of 
wheat and oats less than 6 . 5 bushels, and the domestic consumption 
of pork 75 pounds for each inhabitant, all the requirements of the 
people for bread, meat, spirits, and provender were fully and promptly 
met, it is quite apparent that, estimating consumption per capita as 
15 per cent greater than then, the present supply of beef is sufficient 
for 71,000,000 people, of swine for 76,000,000, of wheat for 79,000,000, 
of corn for 70,500,000, and of oats for more thani 00,000,000. 

The logical conclusion from the evidence offered is that the 
troubles of the farmer are due to the fact that there are altogether 
too many farms, too many cattle and swine, too many bushels of 
corn, wheat, rye, oats, barley, buckwheat, and potatoes, too many 
tons of hay, and too great a production of nearly all other farm 
products for the number of consumers. 

137. LIMITED SUPPLY AND HIGH PRICES 1 

One of the outstanding facts of the social history of the last half- 
century is the rapid growth of large cities. The proportion of the 
total population of the United States living in cities of 8,000 inhab- 
itants and over increased from 12.5 in 1850 to 33.1 in 1900. In 
Massachusetts only about one-third of the population was living in 
cities in 1850, while more than three-fourths of the population is found 
in such cities at the present time. 

In general, there has taken place a great decline in the number of 
persons engaged in agricultural pursuits, and a corresponding increase 
in the number of those employed in urban occupations: (1) a marked 

1 Adapted from the Report of the Massachusetts Commission on the Cost of 
Living, May, 19 10. 



PRINCIPLES OF VALUE AND PRICE 441 

relative decrease of food producers; (2) a relative increase of persons 
engaged in manufacturing industries up to 1890, and particularly in 
the decade 1880-90; (3) a slight decrease in the latter class since 
1890; (4) a relative increase of consumers during the entire period, 
as represented by other occupation classes, especially professional 
service and trade and transportation. 

Under the well-known law of diminishing returns, a common- 
place of economic science, as population grows, recourse must be had 
to poorer soils or those less favorably situated. This may be delayed 
by agricultural invention or development, such as the devising of 
better implements or the learning of better methods of husbandry. 
But unless these obstacles intervene, the law is sure to work. 

This is what has happened in America. From the earliest settle- 
ments on the Atlantic Coast until within the last few years there were 
at all times great areas of unoccupied lands open to the settler without 
price, or at the nominal prices offered by railroads as they were 
extended over the prairies. Thousands upon thousands of immigrants 
from the eastern states and from Europe spread over the land, in such 
numbers that production outran demand, until corn sold at 10 or 12 
cents a bushel in the western central states, and at times was burned 
for fuel, because it was cheaper than coal or wood. 

All this has changed. The pioneer has reached the last frontier. 
The overflow of population from countries where land is scarce has 
at last filled our vast areas, and now in turn is sweeping over the 
boundary into the plains of the Canadian Northwest. Yet the influx 
from the older countries continues. The hamlets of the West have 
become towns; the towns have become cities. The West has now 
an urban population of its own to feed, besides filling the mouths of 
millions in the cities of the seaboard. 

We have come at last to the time when even a bumper crop, as 
the phrase goes, is little more than the supply for a year. A shortage 
makes trouble. Even slight diminutions are felt more keenly than 
actual crop failures of but a few years ago. We are facing the virtual 
disappearance of desirable free land, the breaking up of the cattle 
ranges into farms, the impoverishment of the soil in the Mississippi 
Valley, the mowing of the forests of Maine, Michigan, Oregon, and 
Washington. The new development of dry farming and the irriga- 
tion projects of the far West will perhaps for a time match the march 
of population, but in the end the birth-rate will control. It is said 
that the area of all the arid lands that can be made available bv 



442 



AGRICULTURAL ECONOMICS 



irrigation will not exceed that of Illinois. The staple grains and food 
animals will always be raised on lands for the most part already 
occupied. 

Proof that the home demand for the products of the soil is out- 
stripping the home supply is to be found in the figures of imports. 
Note these comparisons: 



Imports for Consumption 

Breadstuffs 

Meat and dairy products 

Vegetables 

Wood, and manufactures of wood 



i8og 



$ 940,364 
1,950,835 

2,170,959 
8,241,250 



$ 5,190,354 

6,503,773 

8,029,748 

30,642,780 



The value of the agricultural exports of domestic products for the 
year ending June 30, 1909, was $903,000,000, or $151,000,000 below 
the highest record of 1907, and $114,000,000 below the next highest, 
in 1908. The imports of agricultural products were never so high in 
value as they were in 1909, the amount being $637,000,000. 

In 1899 the United States planted about 157,600,000 acres of corn, 
wheat, oats, barley, and rye. The yield averaged 22 J bushels to the 
acre, aggregating 3,519,000,000 bushels, of which we exported about 
356,240,000 bushels. In 1909 the acreage of these cereals had increased 
to more than 197,000,000 acres. The yield to the acre was slightly 
larger than in 1899; the aggregate production, 4,719,000,000 bushels; 
but our exports were only 112,140,000 bushels — a decrease of 68J per 
cent. Although the yield of the cereals to the acre as yet shows no 
widespread lessening, it is certain that we have passed the point of 
unaided fertility in the case of much the greater part of our soil. In 
New England we passed it years ago. The proof is to be found in 
the abandonment of farms and the reduction in the amount of 
improved acreage. The reduction in this acreage in New England 
from 1880 to 1900 was: 



States 


1880 


i8go 


1900 


Maine 


3,484,908 
2,308,112 
3,286,461 
2,128,311 
298,486 
1,642,188 


3,044,666 
1,727,387 
2,655,943 
1,657,024 
274,491 
1,379,419 


2,386,889 
1,076,879 
2,126,624 


New Hampshire 

Vermont 


Massachusetts 


1,292,132 

187,354 
1,064,525 


Rhode Island 

Connecticut 


Totals 


13,148,466 


10,738,930 


8,134,403 





PRINCIPLES OF VALUE AND PRICE 443 

138. PRODUCTION AND POPULATION 1 
By VICTOR H. OLMSTED 

Frequent assertion that the fertility of the soils is washing into 
the streams and that the productivity of cultivated land is diminishing 
are misleading the public into the belief that the agriculture of this 
country is decadent. The real situation cannot be understood until 
it is examined historically. 

From the ten-year period from 1866-1875 to that of 1876-1885 
the production of corn per acre in the United States declined 2 . 3 per 
cent, and the only states in which there was a gain were Maine, 
Rhode Island, Delaware, Maryland, Nebraska, and California. 
From 1876-1885 to 1886-1895 the list of gaining states was increased 
by Vermont, Massachusetts, Connecticut, New York, South Carolina, 
Georgia, Florida, Illinois, Tennessee, Alabama, Mississippi, New 
Mexico,- and Idaho, while Delaware, Maryland, and Nebraska were 
transferred from a gaining to a losing production. The decline of 
production per acre for the United States was 8.2 per cent. Advan- 
cing another decade to 1 896-1 905, corn production per acre gained 
in 30 of the 46 states and territories, and the United States average 
increased 7.7 per cent, in spite of the disastrous season of 1901. 
The mean production per acre during the four years 1 906-1 909 
increased 7 . 1 per cent over the mean of the preceding ten years. 

Wheat has been disposed to increase in production more generally 
than corn. From 1866-1875 to 1876-1885 the mean per acre increased 
in 12 states, and the increase for the United States was 3.4 per cent. 
In the next decade the mean production per acre increased in 24 out 
of 41 states and territories, and the gain for the United States was 
$.7, per cent. In the decade 1 896-1 905, 35 out of 44 states and 
territories showed a gain, while the increase for the whole United 
States was 6.3 per cent over that of the previous ten years. The 
mean of the four years 1906-1909 shows a gain of 9.6 per cent over 
that of the decade preceding. 

Tobacco production increased 3 . 4 per cent in the first decade, 
followed by a decline of 2 per cent, an increase of 5 . 2 per cent, and 
(for the final four-year period) of 9. 7 per cent. 

During two of the four years 1 906-1 909, the cotton production 
per acre was light because of adverse conditions and the boll weevil, 

Adapted from Report of the Chief of the Bureau of Statistics, United States 
Department of Agriculture, 1910, pp. 18-26. 



444 AGRICULTURAL ECONOMICS 

but in spite of that the mean of these four years is o . 3 per cent above 
that of the ten years 1896-1905, which decade exceeded each of the 
three preceding decades in production per acre. For the United 
States the gain was 3.8 per cent over the mean of 1886-1895. 

Potato production per acre in the United States declined sharply 
from 1 866-1 87 5 to 1886-1895, a fter which there was a marked increase 
in both the periods following. The gain for the United States was 
15.3 per cent and the mean of the final four-year period is 15 . 5 per 
cent higher than that of the preceding ten years. 

Hay stood higher in mean production per acre in 1 896-1 905 than 
in any of the preceding three decades, gaining 22 per cent over the 
period 1 886-1 895. A similar sort of statement applies to oats, the 
gain being 15.6 per cent in the decade 1 896-1 905. Again, for barley 
and rye a similar history appears. The former showed 11 . 1 per cent 
and the latter 21.3 per cent increase in the third ten-year period. 
After thirty years of decadence, buckwheat reached the highest pro- 
duction per acre in the records of this Bureau. 

The chart on p. 445 shows the fluctuations in yield from 
year to year and the trend of production of our ten leading 
crops. 

The statistical test that the farmers of this country have met in 
the foregoing examination of production per acre is not as severe as 
the one which in varying degrees and in varying numbers of states 
they are prepared to meet in a comparison of production per acre with 
population. There is a prevalent misunderstanding with regard to 
the nature of the increase of population in this country. It seems to 
be assumed that the net immigration is to continue for a century and 
over at the rate of one-half to three-fourths of a million people 
annually. How quickly immigration can be reduced to zero was 
shown by the industrial depression of 1908. No one who would take 
a far sight into the future would reckon upon an indefinite continuance 
of a considerable immigration. Likewise, the birth-rate of this coun- 
try, as of all the countries of Western and Central Europe, is a dimin- 
ishing one ; so that while the increase of population must be admitted 
to the reckoning, a diminishing rate of increase must be recognized. 
The conclusion of a recent investigator of this problem was that the 
increase of population in this country, after eliminating the influence 
of the foreign-born upon the conglomerate national birth-rate, was 
about 1 J per cent for the census year, or about 12 J per cent for a 
decade. 



PRINCIPLES OF VALUE AND PRICE 



445 



The way is now prepared for a comparison of production per acre 
in recent years with the normal increase of population; that is to say, 
with the increase unaffected by immigration and the high birth-rate 
of the immigrants. This is the form of the problem as it will present 
itself more and more closely as the years elapse. 

From 1 886-1 89 5 to 1 896-1 905 the mean production per acre of 
wheat increased in a greater degree than the normal increase of popu- 
lation in four New England states, New York, New Jersey, and 



S> & 5 



§§§§>§ > 5 




Yearly average yield per acre of 10 leading crops combined (representing in 
area nearly 95 per cent of all cultivated crops), 100 representing the average for 
the forty- three years, 1 866-1 908. (Figures for the last five years supplied by the 
editor.) 



Pennsylvania, eleven southern states, Wisconsin, Nebraska, seven 
mountain states and territories, and Washington. Two states are 
very near inclusion in this list — Wyoming and Oregon. In the case 
of corn, increased production per acre has exceeded the normal 
increase of population in Pennsylvania, Delaware, Maryland, Vir- 
ginia, West Virginia, Ohio, Indiana, Illinois, Michigan, Wisconsin. 
South Dakota, and three mountain states, and very nearly the required 
increased production was made by New Jersey, North Dakota, Ne- 
braska, New Mexico, and Arizona. 



446 AGRICULTURAL ECONOMICS 

A long list of states gained in production of oats per acre in a 
greater degree than the normal increase in population. With regard 
to barley twenty-one states and territories are found in the similar 
list; for rye the list of states numbers 30, for buckwheat 19, and 
Vermont, New York, and Delaware are near the requirement for 
admission to the list. Wisconsin is the only state that has produced 
tobacco with an increase during the time under consideration which 
is larger than the normal increase of population, but the increase is 
very nearly equal to this population increase in the case of Maryland, 
Virginia, North Carolina, Indiana, and Illinois. Increase of cotton 
production per acre above the normal increase of population is found 
in North Carolina, South Carolina, and Oklahoma, with a supple- 
mentary list of four states almost able to enter the list — Virginia, 
Tennessee, Georgia, and Louisiana. 

The list of states that produced potatoes with an increase per 
acre above the normal increase of population contains many of the 
states in the potato belt, and the number is 24, with 4 states almost 
eligible for admission. The largest list of states in the consideration 
of the various crops in which production per acre exceeded normal 
increase of population is found in the case of hay; 35 states are in 
this list with 5 more states having increases nearly sufficient for their 
entry, so that the hay crop of nearly the entire United States has 
increased in production per acre faster than the normal rate of 
increase of the population. 

A still more severe test than the foregoing may be placed upon the 
increased production per acre of the crops under consideration, and 
in this test the increase may be compared with the actual increase 
of population which, as before explained, is greater than the normal 
increase. Corn production per acre increased from 1 886-1 895 to 
1 896-1 905 at a rate which quite or very nearly equaled the actual 
increase of population in Delaware, Maryland, Virginia, West Vir- 
ginia, Ohio, Illinois, Wisconsin, Michigan, South Dakota, and Utah. 
The list for wheat contains 22 states and territories distributed in all 
parts of the United States. In the list for oats are 16 states; for 
barley, 15 states; for rye, 21 states; for buckwheat, 18 states; for 
cotton, only 1 state, Oklahoma, containing new land; for tobacco, 
only Wisconsin; for potatoes, 15 states, all in the potato belt; and 
for hay, 25 states and territories. 

The foregoing presentation of the information that is possessed 
concerning the trend of agricultural production in this country in 



PRINCIPLES OF VALUE AND PRICE 447 

comparison with population makes it plain that in spite of the fact 
that the United States is now passing through some of the early and 
middle phases of agricultural land exploitation, it nevertheless appears 
that the final stage of better agriculture and increased production 
per acre has been reached in many states for a varying number of 
crops, and that production per acre is not only beginning to exceed 
the normal increase of population, but really to exceed the actual 
increase. 

The ability of the soil and of the agricultural arts and sciences to 
produce crops at a rate of increase greater than either the normal rate 
of increase of population or the normal as temporarily influenced by 
immigration, has been demonstrated times innumerable by the 
Department of Agriculture, by the experiment stations, and by intelli- 
gent farmers all over the country. The potentiality of agricultural 
production as a national achievement sufficient for growth of popula- 
tion has been so numerously and so thoroughly demonstrated as to 
be now beyond intelligent question. The Farmers' Co-operative 
Demonstration Work, now carried on in 12 cotton states, employs 
375 traveling agents and has many thousands of demonstrating farms. 
It is proving by results on thousands of farms that preparation of the 
soil so as to make the best seed bed adds 100 per cent to the average 
crop on similar lands with an average preparation in the old way; 
that the planting of the best seed makes a gain of 50 per cent; and 
that shallow, frequent cultivation produces an increase of another 
50 per cent, making a total gain of 200 per cent, or a crop three times 
the average crop produced on those farms where the plans and methods 
of the demonstration work have been adopted. 



139. MISCELLANEOUS FEATURES OF MARKET SUPPLY 1 

There was a scarcity of potatoes free from sprouts this week and, 
as the call was fairly active, the market made slight gains. 



During the middle of last week some dealers predicted that butter 
would gradually advance until it went to a maximum price of 27 cents, 
but the warehouse report on Tuesday, which indicated an excess of 
19,000,000 pounds over a year ago, making a total of 82,844,000 
pounds, had a stunning effect. 

1 Market comments gleaned from various newspapers, trade journals, etc. 



448 AGRICULTURAL ECONOMICS 

Damage caused by floods in the most important Texas potato 
districts is giving an entirely new aspect to the old potato deal. 
Reports received during the last two weeks indicate severe damage 
by water and lead to the belief that the major portion of the Texas 
crop has been done away with. Farmers in the northern states hold 
the key to the situation. A survey of the warehouses throughout 
Michigan, Wisconsin, and Minnesota indicates that less than 10 per 
cent of total holdings are in the hands of dealers. With farmers still 
retaining almost all of the remaining potatoes in the North, the move- 
ment and prices depend entirely on their disposition to sell or hold. 



Seattle jobbers and speculators are awaiting with considerable 
anxiety a decision from the Department of Agriculture at Washington 
regarding their application to permit the importation of Canadian 
potatoes, which would greatly undersell this market. Canadian 
potatoes can be bought in the vicinity of Vancouver and Victoria at 
$15 @ $18, with plenty of stocks on hand, but the horticultural laws 
prohibit entry because of a powdery scab. This week farmer holders of 
eastern Washington who have been asking $32 @ $35 per ton f.o.b., 
have been disturbed by reports, which they regarded as authentic, 
that a trainload of potatoes from Maine was about to be dumped on 
this market to sell at $25. Stock from so distant a point could not 
possibly be sold in competition with the local market, but holders 
took it so seriously that they began cutting prices of their own stocks 
to $30. 

There is a decided improvement in the citrus fruit market through- 
out the country. Evidently the growers and shippers do not intend 
to glut the market with excessive shipments, as the movement last 
week was only nine cars more than the week previous. The growers 
no doubt believe that with a moderate movement from now on to the 
end of the season oranges will bring a fair price. 



Very low prices continue to rule in the California orange market; 
in fact, values are running so low that some of the growers will get 
very little, if anything, back for their fruit. Some of the New York 

trade says that the Exchange has too much fruit to sell. 

Offerings here and in other eastern markets are of poor quality because 
of their age. It has been held up too long, presumably because the 
exchange is topheavy with supplies. 



PRINCIPLES OF VALUE AND PRICE 449 

Forty thousand bushels of onions were destroyed in a fire in the 
onion warehouse at Rensselaer, Indiana, on the night of March 19. 
The destruction of this large quantity of onions has made a material 
difference in the onion market, as it has wiped out over 80 carloads 
which were in fact the largest individual holdings in the state at the 
time. News of the fire had been out but a very short time when the 
leading operators were out buying up all the unsold stock they could 
get hold of, and the market has firmed up considerably, with quota- 
tions ranging from 5 cents to 10 cents per 100 pounds higher than a 
week ago. 

Owing to the flood conditions which have prevailed in California 
during the past ten days or so, there has been a marked shortage in 
butter receipts on the Los Angeles market. The storage stock being 
practically cleaned up, there was little to depend upon except the 
fresh stock arriving in small quantities. As a result the market price 
reached a higher figure than at any time this season or last. Strange 
to say, the unfavorable conditions existing recently have had a tend- 
ency to lower the market on potatoes, as stock intended for eastern 
shipment could not be moved on account of railroad conditions, and 
a goodly amount has been diverted to this market. As a result there 
has been a temporary oversupply. 



The car-lot potato situation at Minneapolis has been quiet, with 
receipts at loading stations practically nil and the movement out of 
the warehouses less than normal. Late last week a cold wave accom- 
panied by heavy fall of snow was general throughout this and neigh- 
boring states, thus largely cutting off receipts from the growers. 
Prior to this cold spell, receipts had been liberal, which resulted in the 
market easing off 5 @ 10 cents from the high marks previously 
recorded. Operators are optimistic, however, declaring that the 
amount of stocks yet held and unsold warrant a firmer figure. This 
spirit of optimism has been augmented by reports coming in from 
stations and by the government's recent report of holdings in the 
northern states. 

The rapid rise in the cabbage market has been the cause of con- 
siderable comment here (Chicago, April, 1915). Operators suddenly 
discovered that there was only a nominal amount of cabbage left in 
New York state, and, with the southern crop coming along slowly, the 



450 AGRICULTURAL ECONOMICS 

supply was considerably less than necessary for the demand. From 
the middle of last week to the middle of this week prices jumped 
several times a day, and by the time the market opened this week 
New York operators were quoting cabbage as high as $36 a ton; 
reports were heard of one or two dealers who were even asking $40. 



For a fortnight prior to the middle of this week potato prices have 
been steadily declining and as late as Tuesday of this week sales were 
made on the Chicago market at 80 @ 88 cents. Light receipts all 
this week began to take effect about Wednesday, and the market took 
on a firmer aspect. This is due largely to the shortage in insulated 
cars, only a few stations reporting that they had sufficient equipment 
to take care of requirements. Also there was a disposition on the 
part of farmers to haul less potatoes, owing to the fact that dealers 
had been dropping their prices at country points in accordance with 
the decline in the market. The conditions of roads in the North was 
bad, making it difficult for farmers to haul. Receipts continued light 
this week, and local operators expressed the belief that the market 
would make a sharp advance within the next week or two. 

140. THE PRESENT DIFFICULTY OF THE SPECIALTY 
FARMER 1 

By G. HAROLD POWELL 

There are approximately two hundred thousand acres of citrus 
fruits in California, representing an investment of $200,000,000. 
Eighty- three per cent of the total acreage in 19 13 were oranges, and 
17 per cent were lemons. Two- thirds of the groves were of bearing 
age in 1 9 13; 85 per cent of these were oranges and 15 per cent were 
lemons. There are now 32,556 acres of lemons in California, 14,500 
of which are of non-bearing age. When the non-bearing lemon groves 
come into bearing, the lemon production of the state, even with a 
moderate yield, will exceed the present total lemon consumption of 
the United States and Canada. 

There has been a steady increase in the acreage devoted to citrus 
culture in California since the introduction of the Washington navel 
orange in 1873. In the ten years from 1903 to 19 13, the citrus area 

1 Adapted from an address delivered before the Eleventh Annual Meeting of 
the Western Fruit Jobbers' Association, Los Angeles, February 16, 1915, printed 
in the Western Fruit Jobber, April, 1915. 



PRINCIPLES OF VALUE AND PRICE 451 

increased from 83,657 acres to 191,357 acres, an increase of 128.9 
per cent; oranges increased 138 per cent and lemons 82 per cent during 
this period. In the five years from 1908 to 19 13, the total area 
increased 29.1 per cent, the increase for oranges and lemons being 
23.3 and 67.6 per cent respectively. 

The shipment of citrus fruits has also increased rapidly. The 
increase in five-year periods in the number of carloads of oranges and 
lemons is as follows: from 1895 to 1900, 225 per cent; 1900 to 1905, 
71.5 per cent; 1905 to 19 10, 10.9 per cent, and 48.5 per cent from 
1910 to 1914. A normal crop now is 50,000 carloads, one-seventh of 
which are lemons. Of the oranges, approximately 63 per cent are 
Washington navels, 27 per cent Valencias, and 10 per cent miscel- 
laneous varieties. The Valencia shipments have increased 60 per 
cent in 19 14 and will increase rapidly in the near future. 

There has always existed a fear since the beginning of the Cali- 
fornia citrus industry, lest the increase in production might outrun 
the increase in consumption; or, to state it differently, that there 
might be more citrus fruits produced than the people could consume 
at a price that would pay the producer. The total consumption of 
citrus fruits has increased in two ways : first, through the increase in 
population, and second, in the increase in the per capita consumption. 
The increase in population is not rapid enough to absorb the increase 
in the production of citrus fruits. The population of the United 
States increased 20.7 per cent from 1890 to 1900; the shipment of 
citrus fruits increased 195 per cent during the same period. From 
1900 to 19 10 the population increased 21 per cent, while the shipments 
increased 292 per cent during the same period. 

In order to stimulate consumption and to insure a fair return on 
the investment, the industry has been obliged to eliminate speculative 
distribution by placing its own agents in the different markets of the 
United States and Canada. Searching investigation has also been 
made of the cultural and labor cost of production, in order that the 
industry may better understand its problems. It has organized on 
a co-operative basis the purchase of materials used in the packing- 
houses and in the groves, and it has secured the aid of the state and 
federal government in order that its business may be conducted 
economically, and the cultural and fruit handling difficulties that 
confront it may be solved by scientific research. 

Note. — Much the same situation has confronted the producers 
of various other fruit and vegetable products — apples, peaches, 



452 



AGRICULTURAL ECONOMICS 



cantaloupes, strawberries, watermelons, onions, and potatoes — from 
time to time. Large acre profits have induced more and more 
specialization in the particular product, till at length the markets are 
swamped and the whole industry made unremunerative. If it be an 
annual crop, the difficulty soon rights itself by curtailment of acreage. 
But in the case of orchard products that have been five, ten, or even 
fifteen years in being developed, readjustment is more difficult. — 
Editor. 



C. Some Phases of Cost of Production 

141. DECREASING COSTS UNDER INTENSIVE METHODS 1 
By LAWRENCE G. DODGE 

The following table represents the usual expense of growing an 
acre of potatoes in Aroostook County, Maine, and in many parts of 
Michigan and Wisconsin. In fact, the second column of figures will 
represent the expense put into growing the crop in most localities 
where potato growing is carried on on a less expensive and thorough- 
going basis. 

COST OF PRODUCING ONE ACRE OF POTATOES IN MAINE AND IN 

WISCONSIN 



Cost of Supplies and 

Labor, with Rent 

of Land 


Maine 


Wisconsin 


Cost of Supplies and 

Labor, with Rent 

of Land 


Maine 


Wisconsin 


Plowing 

Harrowing 

Fertilizing 

Seed 

Cutting 

Planting 


$ I.50 
O.50 
24.OO 
5.00 
0.75 
0.75 


$1.25 
O.25 

2.50 
O.60 
O.60 


Cultivating 

Spraying 

Digging 

Rent of land 

Total 


$ 3-50 

3.00 

6.00 

15.OO 


$ 1.90 
O.80 
2. IO 
5.00 


$60 . OO 


$15.00 





The more expensive method of growing potatoes usually gives a 
yield of 275 bushels or more to the acre. Unless an application of 
barnyard manure is made in addition to the expense estimated, at 
an added cost of from $5 to $10 per acre, the less expensive method 
rarely produces more than 125 bushels per acre and in a great many 
instances less than 100 bushels per acre. The increase in yield as a 

1 Adapted from Farmers' Bulletin 365, United States Department of Agriculture, 
pp. 20-22. 



PRINCIPLES OF VALUE AND PRICE 453 

result of the more costly method is sufficient to more than pay the 
difference in cost, supposing potatoes to sell as low as 33 J cents a 
bushel. One hundred and twenty-five bushels per acre grown at a 
cost of $15 per acre and sold at 33 J cents per bushel yield a net profit 
of $26 . 66 per acre. Two hundred and seventy-five bushels per acre 
grown at a cost of $60 per acre and sold at 33^ cents per bushel yield 
a net profit of $31 . 66 per acre. The second profit is $5 more per acre 
than the first. 

A farmer in Van Buren County, Michigan, states that his potato 
crop, mostly marketed in the fall, sold at an average price of 44 cents 
a bushel for a period of ten years. At the latter price the more 
expensive method of culture would yield a profit of $61 per acre, 
against $40 from the cheaper method. Furthermore, some of the 
leading potato dealers of the North have stated emphatically that a 
better quality of potatoes is normally obtained with large yields than 
with small. 

142. LOWER COSTS TO THE LARGE PRODUCER 

Bulletin gj of the Experiment Station of the University of Minne- 
sota (published also as Bulletin 48, Bureau of Statistics, United States 
Department of Agriculture) presents figures for average costs of pro- 
ducing crops in three representative sections of Minnesota. The 
average size of the farms in the Halstad region was 210 acres, Marshall 
region 250 acres, and Northfield region 170 acres. Similar figures were 
secured from a single farm of 1,800 acres, typical of the large farms 
and extensive methods of grain growing found in the Red River 
Valley. Conditions of labor, size of fields, use of machinery, etc., 
cause it to differ considerably from the smaller sized farms in the 
same region. 



454 



AGRICULTURAL ECONOMICS 







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PRINCIPLES OF VALUE AND PRICE 455 

143. INCREASING COSTS IN THE PRODUCTION OF BEEF 1 
By J. S. COTTON and W. F. WARD 

The cattle-feeding business has changed greatly during recent 
years. Formerly steers from four to six years of age were fed in large 
numbers upon commercial feeds at yards near granaries or mills, or 
on large farms where only the roughage was grown. At the present 
time in the corn belt cattle are usually fed in small herds upon farms 
as a means of marketing farm products by converting them into beef, 
while the manure produced is utilized as a by-product for maintaining 
fertility. The cattle are marketed at eighteen months to three years 
of age. 

A number of factors united to cause these changes. For instance, 
there has been a gradual increase in the value of farm products and 
the cost of farm operations. In the seven leading cattle-feeding states 
the prices of various feeds on December 1 of the years 1899 to 1901 
and 1909 to 191 1 have been taken, and during this ten-year period it 
was found that the price of corn had advanced 29 per cent and hay 
45 per cent, while such supplemental concentrates as linseed-oil meal 
and cottonseed meal had increased in about the same proportion. 
The price of labor has advanced 31 per cent, and feeder steers have 
advanced 36 per cent since 1904. 

This advanced price of feeder cattle is due to the decline in their 
supply, and several reasons are responsible for this falling off. Corn 
belt farmers found it unprofitable to continue the production of 
"native" steers at present prices of farm products, and so have 
turned to dairying or other types of farming. Likewise the supply 
of western range cattle was greatly curtailed by the exploitation 
of dry-land farming, which resulted in the best lands of the open 
range being taken up for grain-growing purposes. This shrinkage 
of the herds culminated in the excessive liquidation due to the 
drought of 1911-12. In the third place, we should realize that the 
increased demand for veal in this country has caused the slaughter 
not only of the surplus dairy calves, but of thousands of beef calves 
as well. 

Lastly, the value of land has increased 103 per cent during the 
decade 1900 to 19 10. This increase in land value makes a much 
larger capitalization upon which interest must be charged. All these 

1 Adapted from Farmers' Bullet in jSS, United States Department of A gi u 
PP- i-5- 



456 AGRICULTURAL ECONOMICS 

items taken together make a heavy increase in the cost of feeding, 
with the result that many feeders have either curtailed their feeding 
operations greatly or else have stopped feeding entirely. 



D. The Nature and Influence of Demand 

144- THE NATURE OF DEMAND FOR AGRICULTURAL 
PRODUCTS 1 

By JOHN G. THOMPSON 

Economists have long recognized that the nature of demand varies 
greatly with reference to different classes of commodities. One such 
distinction made is that between elastic and inelastic demand. 
Demand for a good is said to be elastic when that good is of such a 
nature that the demand is sensitive to price change or to a change in 
the purchasing power of the prospective buyer. If the price tends 
to fall, demand is immediately responsive and tends to increase. If, 
on the other hand, the price tends to rise, demand, again immediately 
responsive, tends to decrease. Where the demand for a good is 
inelastic, however, there is a lack of sensitiveness to price change and 
the demand will be influenced little or not at all. 

Other things being equal, elasticity of demand is said to make for 
stability of price and inelasticity of demand for instability of price. 
Under normal conditions, as the price of a good characterized by 
elastic demand tends to rise, demand, being immediately responsive, 
tends to decline, thus checking the rise in price. If the price of a 
good of the same kind falls, under normal conditions demand imme- 
diately broadens and tends to check the decline in price. With a 
good characterized by inelastic demand, there is little or no check to 
such rise or fall in price. 

Economists have further pointed out that elasticity of demand 
characterizes, in the main, those goods which we recognize as comforts 
and luxuries, while inelastic demand characterizes those classes of 
goods, that we regard as necessities. A certain rather well-defined 
amount of the latter class of goods we want intensely, but once having 
secured this minimum of necessities, we become extremely indifferent 
about an additional supply. 

1 Adapted from "The Nature of Demand for Agricultural Products and Some 
Important Consequences," Journal of Political Economy, XXIV (February, 1916), 
158-82. 



PRINCIPLES OF VALUE AND PRICE 457 

With reference to comforts and luxuries the matter is very differ- 
ent. If the price declines or if the purchasing power increases, those 
who were not able to buy and use comforts before will now come for- 
ward as purchasers, while those who want to enjoy their use more 
generously will purchase in larger amounts . D emand is thus expanded 
or narrowed as the case may be, and the market more or less supported 
as the case may be. Much more in the case of luxuries, desire, given 
proper variety, expands almost without limit as purchasing power 
increases or as prices decline. Under these circumstances the market 
for this class of goods has wide support. In case of higher prices or 
of lessened purchasing power, however, the demand shrinks through- 
out a wide circle. Rise in price is thus checked. In case of extreme 
or abnormal decline in purchasing power in periods of pronounced 
depression prices may fall decidedly with this price of goods. 



II 

The theorist in the economics of agriculture may well consider 
the importance of the distinctions thus pointed out by the general 
theorist in economics. It may be said in the first place that agricul- 
ture is, generally speaking, an industry which has to do with the 
production of the more absolute necessities of life, while the non- 
agricultural industries have to do, in the main, with the production of 
comforts and luxuries. If this be true — and in spite of important 
exceptions it is believed to be substantially true — the demand for 
agricultural products is, generally speaking, inelastic in character and 
that for non-agricultural products elastic in character. 

With reference to food supplies as a whole, it is very evident that 
demand is relatively inelastic. Food up to a certain rather rigid 
limit is wanted imperiously and then any further supply for present 
consumption would be even objectionable. Storage of food supplies 
results in a better seasonal distribution in the consumption of food- 
stuffs and not of larger consumption of food in general. 

With reference to any particular article of food in the consumption 
of which there is no fixed custom or habit there may be a considerable 
measure of elasticity of demand because of the possibility of the sub- 
stitution of one article of food for another. Likewise in a country 
where food has been regularly cheap and plentiful wasteful habits with 
reference to its use may be reformed in periods of scarcity and high 
prices, thus appreciably lessening the total demand for food without 



458 AGRICULTURAL ECONOMICS 

limiting actual consumption. According to recent government inves- 
tigations the waste in families in the United States with incomes less 
than $800 per annum amounts to 3 per cent to 4 per cent, while in 
the case of families with incomes between $1,000 to $3,000 the waste 
frequently amounts to 10 per cent to 25 per cent. Not less, perhaps, 
is the waste in the marketing of produce — not to speak of the waste 
in harvesting, or of the waste which occurs through overeating. To 
take a single illustration, it is estimated that the loss by breakage 
and wastage in the marketing of eggs in the United States amounts to 
$50,000,000 annually. 

It is easy to overestimate the amount of actual saving from such 
sources that may occur in times of straitened purchasing power, yet 
it can hardly be doubted that there is considerably less rigidity of 
demand with reference to the food supply of a people with a generous 
and even wasteful standard of living like our own than in the case of 
the peoples of Asiatic countries or, perhaps, even in Europe. 

There is substantial proof of large increase in consumption of 
certain special articles of food, such as sugar, tea, raisins, tobacco, 
and some kinds of fruit. On the other hand, to offset these increases 
there is the decrease in consumption in more important articles of 
food. Meat is supposed to have constituted about one-half of the 
dietary of the people of this country in 1840, while by 1900 it had 
declined about one-third and has probably declined appreciably since. 
The consumption of corn as human food has also largely decreased in 
this country since early days — especially in New England and in the 
South — and wheat bread has been largely substituted for rye bread 
in Europe. 

On the whole, therefore, such statistics as are available bear out 
the a priori conclusion that the consumption of food on the part of 
the human animal is relatively fixed in amount and that the demand 
for food as a whole is relatively rigid and inelastic. 

This, however, does not prove that the demand for all agricultural 
products is practically fixed. The farmer is not engaged solely in the 
production of foodstuffs but to an important extent also in the pro- 
duction of textile fibers — not to speak of still other products of less 
importance. The demand for the textile fibers depends, of course, 
upon the demand for clothing; and the demand for clothing — espe- 
cially in a country like our own — is decidedly elastic in character. In 
periods of high prices or of straitened purchasing power clothing can 



PRINCIPLES OF VALUE AND PRICE 459 

be worn a little longer, or the individual may content himself or 
herself with less than the usual variety of suits or dresses or hats; 
or, again, the number of occasions for the display of wearing apparel 
may be reduced and thus the number of gowns or suits required be 
reduced. Some persons may be under the stern tyranny of fashion 
and make very great sacrifices rather than depart from their customary 
standard of dress. But there can be little doubt that, in general, 
the demand for clothing — and thus for the textile fibers — is much 
more elastic, in the downward direction, than that for food. 

As between the two classes of commodities the demand in the 
upward direction is incomparably more elastic in the case of dress or 
clothing. While the demand for food simply disappears after the 
rather definite amount of food required is supplied, with increasing 
means or with lower prices for clothing fabrics there is normally a 
disposition to move in the direction of ever-larger demand or of ever- 
increasing expenditure for dress and personal adornment. Much of 
the increased use of raw material due to this expansive demand for 
dress has related to silk and flax — the former of which we do not pro- 
duce at all and the latter of which we do not produce for textiles. 
Much of the increased use of raw material for dress, however, has 
related to cotton, and of this we are, of course, by far the most impor- 
tant producers. 

The demand for hides in the manufacture of foot wear and other 
leather products contributes an element of elasticity of demand for 
cattle and other farm animals. On the whole, however, this demand 
is chiefly incidental to the demand for these animals for other pur- 
poses and is also met to an important extent, in this country, by the 
importation of large numbers of hides and skins. 

Lastly, the demand for corn and oats in the maintenance of work- 
animals and for corn and potatoes in the manufacture of glucose, 
starch, and alcohol may be considered. The demand for feed for 
farm work-animals evidently depends, ultimately, upon the demand 
for farm products in general, and is therefore, on the whole, inelastic. 
The highly elastic demand for power in city activities today takes the 
form of a demand for a mechanical rather than animal power. Finally, 
the demand for corn and potatoes for the industrial purposes indi- 
cated, while relatively elastic in character, is yet very small in com- 
parison with the relatively inelastic demand for the same products 
for other purposes. 



460 AGRICULTURAL ECONOMICS 

i 

III 

Granted, then, the relatively inelastic character of the demand 
for farm products in general, what are the important consequences, 
theoretical and practical ? 

i. This characteristic of inelastic demand helps to explain why 
speculation finds such an important sphere of operations in the field 
of agricultural products. Speculation aims at making a profit out of 
price fluctuation, and, other things being equal, price "fluctuation is 
in proportion to the inelasticity of demand for a good. It is true, of 
course, that farm products are subject to great variations in supply, 
and that this is also an important factor in explaining price fluctuations 
with respect to those products, and consequently in explaining specu- 
lation. But the inexorable character of the demand for these prod- 
ucts, up to a certain point, and the almost total default in demand 
after this point has been reached, afford the necessary background 
and condition for variation in supply to work out its full effects with 
reference to price fluctuation. Relatively small surpluses and deficits 
in farm products have a relatively large effect on the price, and specu- 
lation is thus promoted.' 

2. It may be noted, in the second place, that since international 
trade in grain and in other farm products enables the crop deficits of 
one country to be offset by the crop surpluses of other countries, thus 
equalizing demand and supply for the world as a whole and thus 
affording a very considerable measure of elasticity of supply in the 
country or countries with crop deficits, tariff restrictions or other 
restrictions with reference to international trade in farm products 
necessarily emphasize the effect of inelasticity of demand and supply 
and thus greatly emphasize price fluctuation. Foodstuffs attain to 
famine prices in one country and decline to a low price level in other 
countries one year, and the following year the situation may be com- 
pletely reversed. Speculative conditions are thus everywhere exag- 
gerated. Spurred on largely to increase acreage by the excessive 
prices resulting from the shortage of one year, the agriculturists of the 
country are likely largely to overproduce under the probably more 
favorable crop conditions of another year. Discouraged, in turn, by 
excessively low prices, farmers will limit decidedly the acreage of the 
crop in question, and bad crop conditions and short acreage may again 
coincide, with the result of another series of famine prices — and so 
on indefinitely. 



PRINCIPLES OF VALUE AND PRICE 461 

3. Another interesting result of the characteristic of inelastic 
demand for farm products is the fact that popular judgment, and even 
the opinion of authorities occasionally, with reference to the extent 
of the surplus or shortage of a particular farm product or of farm 
products in general is subject to sudden and violent change as well 
as to the wide departure from the actual facts in the case. Since a 
relatively small shortage in a farm product — particularly a food 
product — has a relatively large effect on the price, popular, and 
occasionally expert, opinion immediately jumps to the conclusion 
that the shortage must be proportional to the rise in the price. Simi- 
larly, with a relatively small surplus and a resulting relatively heavy 
fall in price, the immediate conclusion is that there exists a corre- 
spondingly heavy surplus. 

145. THE ERRATIC PSYCHOLOGY OF DEMAND 1 
By GEORGE K. HOLMES 

The growing, the preparing, and the marketing of many of the 
products of the farm are becoming questions' of art and psychology. 
When people buy food, they buy it often not primarily for the grati- 
fication of taste, but upon the testimony of the eye, which is pleased 
with form and color, and upon the perception of odor, while, if the 
consumer was reared in the country, perhaps his choice is determined 
by the farm-bred fancies of a happy youth. 

What set of nerves shall have the preference in determining the 
purchase of a farm product, the optic or the gustatory? Shall a 
thing be pretty, or delicious; and, since the sense of smell must also 
be consulted in some cases, is it of much consequence whether it is 
pretty or delicious ? The seller has much more definite information 
with regard to these questions than the consumer; although it is the 
consumer who makes the choice, he is induced to do so by the 
seller's subtle knowledge of his fancies, which need not be and 
often are not either sensible or reasonable, but, on the other hand, 
often verge upon the notional, and seem superfluous to an unsophis- 
ticated farmer. 

Butter is an article of food, and, as all but its makers and sellers 
believe, it is bought mainly for food reasons; yet, upon mental 
analysis, it appears that butter is not bought alone for its nutritive 

1 Adapted from "Consumers' Fancies," Yearbook of the Deportment of Agri- 
culture, 1904, pp. 4I7-33- 



462 'AGRICULTURAL ECONOMICS 

value. But, surely then, it must be bought for its taste ? Hardly so, 
if the commercial men know their business. As a matter of trade 
experience they know that the consumer gives almost as much weight 
to the combined testimony of the senses of sight and touch, and some- 
times smell, as he does to the sense of taste. This will appear upon 
examining the butter score of excellence in use by the New York 
Mercantile Exchange and generally in use by dairymen. 

Flavor, appealing to the gustatory nerves, has a weight of 45 
points; the grain, body, or texture, which is perceived by the nerves 
of touch in the mouth, particularly those of the tongue, has a weight 
of 25 points; the salting, 10 points; the color of the butter, 15 points; 
and the style of the package, 5 points — altogether making 100 points, 
indicating perfect butter upon full scoring. 

The nerves of taste influence the choice of the purchaser to the 
extent of only 55 per cent; to the nerves of touch in the mouth is 
granted an importance of 25 per cent; so that butter appeals to the 
mouth to the extent of 80 per cent of its attractions, the remaining 
20 being offers to the favor of the eye. 

For commercial purposes — that is, for the purposes of attracting 
and pleasing consumers — only 45 per cent of the perfection of cheese 
is regarded as appealing to the taste. Almost one-third of the total 
of excellence, or 30 per cent, is perceived by touch in the mouth, and 
25 per cent, or one-fourth, is purely an appeal to the eye. 

Horticulturists have been saying for years that in the so-called 
improvement of fruits we have generally failed to improve the quality. 
The most productive of cultivated blackberries are large and beautiful, 
but, as found in the market, are inferior in flavor when compared with 
the wild ones found along the roadside. As Professor Bailey has 
said, "the best market fruits are cultivated for a variety of features, 
as size and color of fruit, vigor, hardiness, and productiveness of the 

tree; quality is usually not considered Quality and other 

characters of cultivated fruits appear independently of each other, 
and there is no true correlation between these characters." 

Place a farmer and a city-bred man in the presence of a large 
variety of apples, and the farmer, very likely, will select for his eating 
such apples as a Rhode Island Greening, a Northern Spy, a Grimes' 
Golden, or a Jonathan, and the city man, governed in his choice by 
different sets of nerves, may select a Ben Davis, Baldwin, Stark, or 
Missouri Pippin. Taste is the fruit grower's principal test of an 
apple, if he has to eat it himself, but very different attributes are of 



PRINCIPLES OF VALUE AND PRICE 463 

chief importance when he considers consumers in general, most of 
whom are townspeople. 

In the city, a large city especially, the appearance of an apple is 
everything and taste nothing, unless the purchaser was once a country 
boy and enjoyed the freedom of an orchard. For some reason red 
is a leading favorite as an apple color in this country; indeed, there 
are some red apples that are miserably poor for eating purposes which 
sell for good, if not high, prices — the principal attraction to the con- 
sumer apparently being the red color, with subordinate attractions in 
smoothness and shapeliness. 

The sale of corned beef, cured hams, sausage, and some salt meats 
of other descriptions is largely influenced by color, the popular preju- 
dice favoring meat that has been cured and colored with the addition 
of saltpeter. Sausages and other forms of minced meats are also fre- 
quently colored by aniline dyes, as are the wrappers of smoked 
sausage and of ham. It is probable that commercial sausages of some 
varieties not so colored would find little sale in competition with the 
colored goods. [Note the bearing of pure food laws on this and 
similar points. — Editor.] 

Yellow-skinned chickens have the preference in parts of this 
country as against those whose skin is more nearly white. This 
preference may be on account of the suggestiveness of fat beneath 
the skin, although, as a matter of fact, chickens store very little fat 
next to the skin, and then only in certain places, and certainly not 
on the legs; furthermore, the yellowness of the chicken's skin is 
inherent, and not derived from the fat beneath the skin. On the 
contrary, in some European countries the preference is for chickens 
with the lighter-colored skin. 

A curious preference, entirely unassociated with taste, is the color 
of eggs. Brown eggs sell for a cent or two per dozen more than white 
eggs in Boston, and the contrary is true in New York. Let white 
and brown eggs be mixed, and a dozen of them will sell for less than a 
dozen of either assorted, and let one or two "dirties" be visible and the 
price goes still lower, although, as a matter of fact, in any case the con- 
tents of the eggs are of perfect quality and cannot be* distinguished by 
taste, appearance, or nutritive value, one egg from another. Chicago 
is said to be undiscriminating with regard to color of egg shells, but 
San Francisco prefers white ones. In some markets where the brown 
egg is favored, as in those of England, it is said to be not uncommon 
to color shehVof white eggs with coffee decoction or some dyestuff. 



464 AGRICULTURAL ECONOMICS 

Butter and cheese are almost universally colored to meet the 
popular demand, and this demand varies so in different sections of 
this country that it is necessary for manufacturers and shippers to 
prepare their shipments especially for the section of country in which 
they are to be consumed; for instance, Washington demands a darker 
butter than Chicago, and New Orleans demands a color still darker 
than Washington. 

One of the weaknesses of consumers is an admiration for foods 
that are polished or have a gloss, and this nickel-plate fancy plays 
some queer pranks with foods. The lifelong resident of the large city, 
for instance, who has no first-handed knowledge of an apple orchard, 
may buy from an apple woman at the street corner a pretty red apple 
with a wax-like polish on its surface secured by an application of 
saliva and a dirty rag. On the contrary, the apple-loving country- 
man, especially one who has come to be known as a "horticulturist," 
delights in the natural bloom of the apple. 

Lettuce is one of the most fickle of plants in popular fancy. 
Different types are popular in different parts of the country. Some- 
times the markets of cities only 100 miles apart will each call for 
types which would be unsalable in the other. In general, the cluster- 
ing and crinkled-leaved varieties are more largely preferred than the 
smooth-leaved and heading sorts, and green sorts are preferred to 
those with brown, but some markets prefer the brown. 

The firm-fleshed European sorts of cantaloupe are rarely seen. 
Americans prefer the softer although coarser-fleshed sorts. Carrots 
are not so largely used in this country as in Europe for table purposes, 
but when so used a deep orange color is wanted. 

Whiteness of foods is so frequently the aim of the food producer 
and of the cook that some underlying cause would seem to be back 
of this. Perhaps it is because whiteness is so often an indication of 
cleanliness; at any rate, the eye is immediately to be pleased, let the 
source of the fancy be what it will. 

In parts of England a white potato is preferred to one with a 
colored skin. A preference for the external whiteness of the potato 
does not seem to have arisen in this country, but its inside whiteness 
is admired at the dining-table when exceptionally pure. 

Perfectly white beet or cane sugar is desirable and, since it has 
been found impossible to produce this by bleaching, a small amount 
of some blue substance, such as ultramarine, is added to neutralize the 
slightly yellow tint of the crystals. 



PRINCIPLES OF VALUE AND PRICE 465 

The demand for whiteness, to which should be added plumpness, 
has pursued the delicious oyster until in some markets it has lost 
much of its flavor. 

Flour made from cereals is perhaps the most conspicuous illustra- 
tion of the consumers' insistence upon whiteness, and that the origin 
of this preference was in efforts to secure cleanliness in bread making 
is a suspicion, although it may have been due to the telltale dark color 
of bread made by the inexpert maker who allowed the dough to take 
too long a time in rising. Perhaps for one or both of these reasons 
grew the bread-maker's pride in the whiteness of her bread. Thus 
was enforced the housewife's demand for wheat flour that should make 
white bread. In the estimation of the old lovers of buckwheat cakes 
buckwheat flour has suffered because of the growing demand for 
whiteness. Formerly buckwheat flour was slightly brown and the 
buckwheat flavor was unmistakable and easily detected, but more 
recent milling processes have made this flour much whiter, and besides 
this the adulterator has not neglected the opportunity to promote the 
whiteness by combining with the buckwheat flour some cheaper and 
whiter wheat or corn flour. 

Further pursuit of this subject is unnecessary to enforce the lesson 
that runs through the foregoing pages. Farmers should learn the 
whims and fancies of the markets that they reach, or can reach, and 
endeavor to meet those fancies. By so doing the highest prices and 
the largest profits may be obtained. If a farmer's products are such 
as go to customers who are whimsical or fanciful in their choice, and 
fall short of meeting such requirements, there is likely to be no profit 
in his operations. The farmer should not produce primarily to please 
himself and his own ideas of excellence; when he does so he may find 
a wide chasm between himself and the people whom he would like 
to have for customers. 

146. DEMAND AND MARKET PRICE OF FRESH FRUITS 1 
By A. U. CHANEY 

We must concede that the market price of any article is deter- 
mined by the law of supply and demand. The demand, I believe, 
affects the price on fresh fruits more quickly than the supply. Then 
let us first discuss what influences the demand. 

1 Adapted from an address by the general manager of the American Cranberry 
Exchange, delivered before the Twelfth Annual Meeting of the Western Fruit 
Jobbers' Association, printed in the Western Fruit Jobber, February, 1916. 



466 AGRICULTURAL ECONOMICS 

The demand for fresh fruits is influenced by weather conditions, 
quality and appearance, packing, container, advertising, stability of 
market, and the price. 

The weather is often a greater factor than the price in creating 
or retarding the demand to an abnormal degree. For example — 
lemons, cantaloupes, strawberries, etc., are in greater demand when 
the weather is hot; whereas apples, cranberries, sweet potatoes, 
cabbage, etc., enjoy the greatest demand in cool weather. Ask 
almost any market expert to hazard an opinion as to the probable 
market price of fresh fruits, even as much as one week ahead, and he 
usually prefaces his answer by providing for weather conditions. 

The quality and appearance of fresh fruit more easily influence 
the desire of the consumer than the price. The desire seems to be 
more easily created by sight than by taste. Quality and packing of 
fresh fruit are of such importance that proper standards of quality or 
grading of all varieties of fruit and produce should be established, 
either by the government or by growers' or trade organizations. 
Producers everywhere should be educated to the supreme importance 
of quality and appearance. Fruit should be picked in prime condi- 
tion, and it should be stored and packed so that it will reach the con- 
sumer while it is attractive and sound. 

Good packing influences the demand decidedly. The highest 
quality of fruit often has a large percentage of its value wasted by 
careless, improper packing, even though packed in proper packages. 
Much of the trouble is caused by lack of knowledge of how to pack 
properly. Especially is this true among small growers. Much of it 
is caused by growers' inability to secure experienced, trained packers. 
This is especially true in new producing districts. Some of the poor 
packing is caused by the lack of appreciation of the producer as to its 
importance, and coupled with this is his desire to pack cheaply, and 
such an offender usually disregards advice until he has tried out all 
markets and various sales agents in an effort to get full price for 
cheaper packing. To some degree every shipment of poorly packed 
fruit reduces the value of all receipts of similar fruit in the market 
that it reaches. 

The container should be such as will best insure the safe trans- 
portation of its contents, be of convenient size, and be neat and clean 
in appearance, and when opened it should so display its contents 
as to attract the consumer's attention. The necessity of national 
standardization of containers is constantly growing in importance. 



PRINCIPLES OF VALUE AND PRICE 467 

Standards of measure greatly vary in different states and communities. 
Shipments of the same commodity may reach a market like New York 
City on the same day from many different states, packed in almost 
as many different styles or sizes of containers, according to the custom 
or state law. Under such chaotic conditions proper prices can hardly 
be determined and unnecessary annoyance and waste of values are the 
natural result. 

The advertising feature affecting demand is of more importance 
than many producers and dealers appreciate. The seasons for some 
of our very best fruits are short and often they are half over before 
a large part of the consuming public knows or realizes what fruits are 
"in season." A great many retail dealers fail to buy or display a 
variety of fruit until they begin to have call for it from the consumer. 
Often this is the sole cause of slack demand and abnormally low prices 
during the first part of the season. By advertising at the proper time 
in ways that will attract the notice of retailers and consumers, the 
demand is greatly increased. 

The stability of market, when possible to secure it, I believe, goes 
farther toward encouraging the jobber and retailer to push sales and 
take special interest in a fresh product than anything else. It is my 
observation that the consumption of fresh fruit, perhaps more than 
anything else, increases according to the degree the sale is pushed. 
The rapidly increasing crops of fruits make it imperative that a 
demand be created that is far beyond the natural call. There is a 
vast difference between the sale of fruit which the dealer simply has 
for sale for those who come to inquire for it than there is for the fruit 
which the jobbers must dispose of by sending out salesmen to solicit 
orders from retailers, because, in addition, the salesman should inform 
the retailer as to what is in the market and what is due to arrive soon, 
and enthuse the retailer, in turn, to solicit the consumers' considera- 
tion. 

The jobber and retailer are' the natural acting salesmen for the 
producer, and on these salesmen's efforts the growers' interest depends. 
They are the necessary connecting links between the producer and 
consumer. The interest they take in pushing the sale of fresh fruits 
is naturally influenced by the certainty of their remuneration. The 
smallest liability to loss and the greatest certainty of a moderate profit 
interest them more quickly and certainly than the possibility of largo 
profits, coupled with the danger of serious losses. The frequency of 
violently fluctuating values and heavy shrinkages make margins which 



468 AGRICULTURAL ECONOMICS 

appear unreasonable necessary. Large corporations or organizations 
and close co-operation among both growers and jobbers in order to 
regulate the supply and distribution so that all fresh fruit and produce 
may reach the consumer while in prime, palatable, and attractive 
condition, would tend to establish this market stability, broaden dis- 
tribution, increase the interest of dealers, greatly increase consump- 
tion, and reduce the present margin of profit or cost between producer 
and consumer more than any other system. 

The price is perhaps the last, but not the least, item to consider 
in influencing demand. The desires for our fruits must first exist in 
the mind of the consumer, and then the price must be within his 
means to insure his purchase, and it must be in proper relation to 
values of competitive foods. The haphazard, random statements 
frequently appearing in the newspapers and magazines, that, at best, 
deal only in generalities and seldom touch the facts as applied to 
fruits, is one of the factors in destroying demand, because the con- 
sumer assumes through repeated reading that a commodity is high 
when in reality it is low. There is, however, always a high point in 
values, where, if it is reached, the consuming masses will turn to sub- 
stitutes and a later reduction in price will seldom bring back the con- 
sumers' favor during that season. Marketing men generally under- 
stand the serious danger of a high price diverting consumption away 
from their product. 

Example: During the cranberry season of 191 2, I addressed the 
following query to two hundred retail dealers throughout the United 
States: 

"Supposing the retail price of cranberries is 8J cents per quart, or 
3 quarts for 25 cents, please state what reduction in your sales would 
result from advancing the price to 10 cents per quart, 12 J cents per 
quart, 15 cents, and 25 cents?" 

I received ninety-two replies, and from twenty different markets 
located in sixteen different states. The average of these replies 
showed that the estimated percentage of decrease of sales as price 
advanced was as follows: 

Advance from 8 J cents to 10 cents per quart reduced sales 12 per 
cent. 

Advance from 10 cents to 12 J cents per quart reduced sales 23 
per cent. 

Advance from 12^ cents to 15 cents per quart reduced sales 37 
per cent. 



PRINCIPLES OF VALUE AND PRICE 469 

Advance from 15 cents to 20 cents per quart reduced sales 67 per 
cent. 

This same inquiry was made by the Hon. J. A. Gay nor, of Grand 
Rapids, Wisconsin, a prominent cranberry grower, to one hundred 
retailers in the state of Wisconsin in 1906, with the following result: 

Advance from 10 cents to 12 J cents per quart reduced sales 49 
per cent. 

Advance from 12 J cents to 15 cents per quart reduced sales 74 
per cent. 

The difference in these two sets of figures may be due to an 
increase of regular cranberry consumers by 191 2. 

147. INCREASING DEMAND AND RISING PRICES 1 

The increasing urban concentration of population has been an 
influential factor in the increase of prices of the commodities of com- 
mon consumption. The significance of the city- ward drift of the 
population on the side of supply, in reducing the volume of agricultural 
production, has been pointed out elsewhere in this report. Not less 
potent is its influence in increasing the demand. City growth has 
unquestionably played a part in the advance of the cost of living. 
The great bulk of the population has been transferred from the ranks 
of food-producers in the country to the class of food-consumers in the 
city, and this at the same time has increased enormously the difficulty 
of distributing the food supply. The growth of the cities has also 
contributed to advance the cost of living in other ways than merely 
through the transfer of the population from the food-producing to the 
food-consuming class. Everybody knows the growing practice of 
living from hand to mouth, and buying in small quantities; extension 
of credit buying instead of cash purchases; the generally higher scale 
of living; and the inevitable temptations to spend and waste. 

Finer and more varied food than heretofore is now generally 
demanded by the workingman, on account of an educated taste, and 
also, perhaps, because of the more general publicity as to what is con- 
sumed by the other classes. The result is an increased demand, which 
advances prices. 

In former days garments were often worn until the color changed 
and the cloth became threadbare; nowadays the workingman discards 

1 Adapted from the Report of the Massachusetts Commission on the Cost of 
Living, May, 19 10, pp. 491-95. 



47° AGRICULTURAL ECONOMICS 

clothing long before these conditions appear. As is the case in the 
improvement of homes, so, naturally, the larger demand for clothing 
vastly increases the demand for materials and labor. The resulting 
scarcity of wool, for example, has greatly advanced its market price. 
The general advance of the standard of living throughout all the 
ranks of the population, from the highest to the lowest, is manifestly 
one of the most potent causes of the increase of the demand for com- 
modities, and consequently of the advance of prices. On every side 
the wants of the people have been multiplied and diversified. They 
demand more and better things. Their requirements are larger, more 
varied, and more exacting. The growth of the cities, the cult of 
fashion, the increase of leisure, and numberless factors have combined 
to bring about this advance of living standards. Rational extension 
and diversification of consumption are highly desirable. When, how- 
ever, the change proceeds so rapidly as during the last decade, it 
accelerates greatly the upward movement of prices. The resulting 
increase of the cost of living is likely under these circumstances to 
produce a reactionary effect on the standard of living, causing the 
consumers to curtail expenditures, and thus to abandon the gains that 
have been briefly won. In short, the advance of the standard of living, 
if not rationally guided and safeguarded, threatens to bring about a 
later decline of the standard to a lower level. 

148. SUBSTITUTION AS A FACTOR IN PRICE-MAKING 1 
By EDWARD T. PETERS 

That the price of an article is influenced by the supply, not only 
of the article itself, but also of other articles which may be used in its 
stead, is a familiar principle of economics ; but, owing perhaps to the 
insignificance of the rye crop of the United States, the influence of the 
rye supply upon the price of wheat does not seem to receive in this 
country the attention to which it is entitled. For the five years from 
1895 to 1899, inclusive, rye formed 49 and wheat 51 per cent of the 
combined European crops of these two grains, and the European pro- 
duction of the two together formed 69 . 5 per cent of the world's pro- 
duction of the same two cereals. Of the world's production of wheat, 
however, Europe contributed only 55.5 per cent, whereas she con- 
tributed of the world's production of rye no less than 94 . 1 per cent. 

1 Adapted from "Influence of Rye on the Price of Wheat," Yearbook of the 
Department of Agriculture, 1900, pp. 167-82. 



PRINCIPLES OF VALUE AND PRICE 



471 



Nearly three-fourths of the world's rye crop is produced in two 
countries, namely, Russia and Germany; hence, if the rye crop of these 
two countries be added to the wheat crop of the world, there will be 
a much closer approach to the world's supply of breadstuffs than is 
made by taking the wheat crop alone; and comparison will show that 
in most cases there is also a much closer approach to a satisfactory 
explanation of the movement of prices in harmony with the law of 
supply and demand. This will sufficiently appear upon examining 
the accompanying table. 

MOVEMENT OF SUPPLY AND AVERAGE EXPORT PRICE 



Year 



1887. 
1888. 
1889. 
1890. 



1893. 
1894. 
1895. 
1896. 
1897. 
1898. 
1899. 





Wheat Sup- 


World's 


ply plus Rye 


Wheat 


Crop of 


Supply 


Russia and 




Germany 


Bushels 


Bushels 


2,485* 


3,530* 


2,439 


3,4H 


2,302 


3,102 


2,377 


3,327 


2,435 


3,163 


2,490 


3,407 


2,57o 


3,652 


2,646 


3,840 


2,577 


3,654 


2,498 


3,597 


2,252 


3,195 


2,982 


4,046 


2,762 


3,976 



Average Ex- 
port Price 

or Wheat in 

the United 

States 



Cents 



85 
89 
^3 
93 
102 

79 
67 
57 
65 
75 
98 
74 
7i 



Increase (+) or Decrease: T „„__.„_. „_ 
(-) in World's Supply g™S S 

United 

Wheat plus I States Ex " 
Rye 



Wheat alone 



Per Cent 



- 1-9 

- 5-6 
+ 3-3 
+ 2.4 
+ 2.3 
+ 3-2 
+ 3-o 

- 2.6 

- 3-i 

- 9.8 
+32.4 

- 7-4 



port Price 



Per Cent 



3-4 
9.1 

7-3 
4-9 

7-7 
7.2 

5-i 
- 4.8 

- 1.6 

- 11. 2 
+ 26.6 

- 1.7 



+ 



+ 



Per Cent 



+ 4-9 

- 7-2 
+ 12. I 
+ IO.O 

— 22. I 
-15-9 
-14-3 
+ 13-7 
+ I5-0 
+ 30.5 

-23-9 

- 4.0 



* 000,000 omitted. 

Though 1891 shows an increase of 2.4 per cent in the world's 
wheat supply and 10 per cent increase of the price, the supply of 
breadstuffs for that year shows a decrease of 4.9 per cent, if the 
German and Russian rye crop be taken into account. Changes in 
price appear to occur in harmony with changes in the joint supply of 
breadstuffs, rather than with the change in the world's wheat supply 
alone. 

The apparent anomaly of decreased supply and lower price in 
1889 is simply an illustration of a particular phase of this same prin- 
ciple of substitution. Of the decrease in the world's wheat supply, 
the decrease in the Russian wheat crop accounts for 88.3 per cent, 
and the Russian decrease in wheat and rye accounts for 92 . 9 per cent 
of the falling off in the joint product of breadstuffs. Local scarcity 



472 AGRICULTURAL ECONOMICS 

will affect general prices only in proportion as the general supply is 
drawn upon for relief. Now, there are districts in Russia in which, 
because of remoteness from lines of transportation or poverty which 
prevents its people from buying sufficient food, after bad harvests, 
scarcity exists unrelieved. Even though their rye crop was 166 
million bushels short in 1889 and their crop of wheat 121 million 
bushels less, Russia exported in that year only 20 million bushels less 
of wheat than they had in the year following the abundant crop of 
1888. The peasants were too poor to substitute this export wheat 
for their accustomed diet of rye bread. It may be added that the 
potato crop of 1889 was almost universally good, being about one- 
seventh greater than that of 1888. 

In the following year, the potato crop fell off 300 million bushels 
(10 per cent) and the wheat crop increased 37 million bushels and rye 
130 million. However, the export of both the latter rose by only 
4 million bushels. The Russian peasant had a more abundant supply 
of black bread, but the white-bread countries did not get their wheat 
at a lower price. The effective supply at the centers of exchange 
was really smaller in 1890-91 than in 1889-90, notwithstanding that 
the wheat and rye crops of these years stood to each other in just the 
opposite relation. 



149. MISCELLANEOUS FACTORS OF DEMAND 1 

In the last six months (March, 191 6) New York state dried-apple 
interests have lost approximately $200,000, owing, for the most part, 
to the embargo placed on all foodstuffs formerly shipped to Germany. 
When we consider that before the war Germany bought two-thirds of 
all the evaporated apples packed in this country, the seriousness of 
the situation is apparent. 



Monday's prices on California oranges were lower on all sizes and 
grades of fruit, decline on best stock amounting to fully 10 @ 15 cents 
per box and 1 5 @ 2 5 cents per box on other grades. This was accounted 
for by the extremely cold weather, which practically stopped the move- 
ment of fruit. This condition prevailed up till Thursday's sale, when 
the demand improved considerably and good stock showed an advance 
of 10 cents per box. 

1 Clipped from various newspapers. 



PRINCIPLES OF VALUE AND PRICE 473 

$100,000,000 worth of material being supplied Europe by the manu- 
facturers in the Pittsburgh district. $20,000,000 order placed by the 
Pennsylvania Railroad Company. This means that every able- 
bodied man in the Pittsburgh district will be employed. This means 
that each family will have cash to pay for fruits and vegetables. Ship 
to us ! 

Cold, damp weather had a very bad effect upon the California 
asparagus market this week. This is the coldest March New York 
people have experienced in a long time, and for western grass to move 
well at satisfactory prices, the weather must be warm. 



At the present rate of movement it would take 200 days to dispose 
of all the apples now stored in western New York. According to that 
calculation, apples would not clean up until next August. But the 
demand for apples will stop long before that time. In fact, there is 
scarcely any demand for apples in June. The trade figures that it likes 
to get out of the deal by the end of April, but it usually takes well into 
May. It is almost impossible to prolong the movement after June 1, as 
fresh vegetables and fruits are plentiful and cheap by that time and 
there is not much demand for apples. 



The strawberry market ruled easy this week. On Wednesday and 
Thursday the movement of Arkansas berries to this market increased 
from two to four cars to seven and nine cars daily, which was in excess 
of the demand at $3 per 24-quart crate, and prices paid on Thursday 
averaged $1 . 50 to $1.75 for the best fruit. At this price there was a 
good movement and the offerings were well cleaned up. 



Dressed poultry receipts continue liberal, with a light demand, 
thereby causing an easy market. The quality is good and receivers 
are at a loss to understand the cause of such a light trade, and attribute 
it to general economic conditions. As stated before, there has been 
an enormous curtailment in the demand, owing to the shutting off of 
the ocean steamship business. Trade was fairly active on live poultry 
this week in a local way, but liberal receipts made lower prices neces- 
sary on fowls, which comprised the bulk of the arrivals. Dealers did 
not look for a pronounced decline, however, because of the presence of 
the Jewish holidays. 



474 AGRICULTURAL ECONOMICS 

JEWISH HOLIDAYS FOR THE YEAR 5676 

New Year, September 9 and 10, 1915. — Best market days, Septem- 
ber 3-7. Kinds most in demand: fowls, turkeys, ducks, and geese. 

Day of Atonement, September 18, 191 5. — Best market days, 
September 13-16. All prime stock wanted, especially spring chickens 
and roosters. 

Feast of Tabernacles, September 23 and 24, 1915. — Best market 
days, September 20-22. Kinds most in demand: fowls, ducks, and 
fat geese especially. 

Feast of Law, September 30 and October 1, 1915. — Best market 
days, September 27 and 28. Prime quality of all kinds wanted. 

Purim, March 19, 19 16. — Best market days, March 14-17. 
Kinds most in demand: fowls and prime hen turkeys. 

Passover, April 18 and 19, 1916. — Best market days, April 12-15. 
Kinds most in demand: turkeys, heavy fowls, fat ducks, and geese. 

Last Passover, April 24 and 25, 1916. — Best market days, April 
19-22. Prime quality of all kinds wanted. 

Feast of Weeks, June 7, 19 16. — Best market days, June 1-5. 
Good fowls especially wanted. 

E. Some Agencies of Price Control 

150. COFFEE " VALORIZATION" IN BRAZIL 1 
By LINCOLN HUTCHINSON 

Rapidly increasing world demand, a wonderfully fertile soil, and 
cheap labor kept the Brazilian coffee industry in a flourishing condi- 
tion down nearly to the close of the imperial regime in 1889. After 
the abolition of slavery and the establishment of the Republic, several 
factors contributed to prolong the prosperity. World demand con- 
tinued to increase, virgin soil was still available, immigration supplied 
labor, and Brazilian currency was falling in gold value. The inevit- 
able happened. Easy profits led to increased investments and care- 
less methods. Little effort was made to cultivate intensively. Hand 
labor in cultivating, picking, washing, drying, hulling, polishing, sort- 
ing, packing, loading, remained in vogue, and planters fell into a 
luxurious absenteeism in the capital or in Paris. 

The time came, about the beginning of the new century, when 
conditions changed. Supply passed demand, formidable surplus 

1 Adapted from "Coffee 'Valorization' in Brazil," Quarterly Journal of Eco- 
nomics, May, 1909, pp. 528-35. 



PRINCIPLES OF VALUE AND PRICE 475 

stocks began to appear, prices, which had long been declining, fell 
to or below cost of production, Brazilian exchange reached bottom 
and began to rise rapidly. The conditions of the nineties were 
reversed, and planters began to turn to the banks for aid. A few 
far-seeing ones realized that the real remedy lay in the introduction 
of methods which should reduce the absurdly high cost of production, 
but they were unable to turn the tide. When bank assistance failed, 
demand was made for artificial checking of supply, and the govern- 
ment prohibited further planting. But results were small. The law 
was evaded to some extent; but, even if obeyed, it would have failed, 
for the improved methods employed by the few saner planters, and 
the coming to maturity of trees set out during the preceding decade 
continued to augment the crops. 

The three coffee states have long been the chief economic and 
political centers of Brazil. Especially is this true of Sao Paulo, and 
Sao Paulo was the chief sufferer in the coffee crisis. Coffee-raising 
is almost its sole industry. Conditions demanded either reform in 
methods of production, with bankruptcy for the weaker planters, or 
further government assistance. The latter was the easier solution, 
and it was a political possibility. Soberer views might still have pre- 
vailed but for a new danger — the "bumper" crop of 1906-7. Bra- 
zilian production had risen slowly from 9,500,000 bags in 1899-1900 
to 1 1,300,000 bags in 1905-6. Then it suddenly jumped to 20,000,000 
at a time when there was already a surplus stock on the market of 
some 4,000,000 bags. Small wonder that the warnings of the wiser 
minority were unheeded, and that the coffee states, led by Sao Paulo, 
launched their valorization plan. 

By this plan the states of Sao Paulo, Minas Geraes, and Rio de 
Janeiro agreed to purchase and hold for better prices enough coffee to 
keep out of the market all but a quantity sufficient to supply the 
world demand, which was estimated at 17,000,000 bags. Feeling that 
Brazil held a virtual monopoly of the trade, the advocates of the 
scheme maintained that this withdrawal of excess supply would at 
once force prices up to the minimum fixed by the government as the 
basis for their purchases or subsequent sales. This price was to be 
from 32 to 35 milreis per bag for Santos grade No. 7, with other grades 
in proportion. It was determined by an estimate of " reasonable 
profit" at existing cost of production. 

Funds for the purchase were to be raised by a £15,000,000 loan 
on the credit of the states. Interest, amortization, and other charges 



476 AGRICULTURAL ECONOMICS 

were to be provided for by a surtax on coffee exports of 3 francs 
per bag. 

Difficulties immediately appeared. Capital was loath to back 
the scheme, and the loan could not be placed without federal guaranty, 
and this the federal government declined to give. Sao Paulo's two 
co-operating states grew timid and withdrew. The plan must be 
abandoned or Sao Paulo must act alone. 

This the state decided to do. It began operation by the issue of 
treasury bills for £1,000,000. With the proceeds it purchased coffee 
and used this as the basis for loans the service of which was to be met 
by the surtax of 3 francs per bag. Rio de Janeiro and Minas Geraes 
supported the plan to the extent of imposing a similar tax, but they 
apparently took no part in the coffee purchases. 

Sao Paulo also succeeded in placing loans of £1,000,000 with the 
Brasilianische Bank fur Deutschland (soon afterward redeemed, how- 
ever), £3,000,000 with the federal government, and later £3,000,000 
with Schroeder & Co. of London, and the National City Bank of 
New York. 

By the end of 1907 Sao Paulo had borrowed some $88,400,000, 
and had purchased, at rates about $1.22 per bag (of 132 pounds) 
above the market price, 8,357,500 bags of coffee. But prices failed 
to rise. In fact, they fell slightly. The existence of the huge govern- 
ment stock induced conservatism among dealers. Possibly, too, there 
were thrown on the market stocks which had been previously hoarded 
in anticipation of valorization. The proceeds of the surtax were 
insufficient to provide safely for interest, storage, commissions, amor- 
tization, etc. Attempts to dispose of portions of government holdings 
threatened further to demoralize the market. Creditors grew nervous 
and began to demand their money. Sao Paulo found itself unable 
to raise further funds on coffee collateral. Purchases had to be sus- 
pended, and valorization may be said to have come to an end by the 
beginning of 1908. 

The results of the experiment were yet to be faced, however. Sao 
Paulo had incurred a heavy debt in the interest of the plan, and the 
state found itself the possessor of a huge stock of coffee for which it 
had paid at rates considerably above the market. World supplies 
continued to be about equal to world demand, in spite of a decline 
in the Brazilian crop to more normal proportions. Creditors were 
clamoring for liquidation. 



PRINCIPLES OF VALUE AND PRICE 477 

The only escape from bankruptcy seemed to lie in a refinancing 
of the government obligations and a definite plan for realizing on the 
coffee holdings, and nearly the entire year 1908 was spent in negotia- 
tions having this end in view. These recently (December, 1908) 
reached a successful issue, but only after the federal government had 
come to the assistance of the state by granting an unqualified guaranty 
of a new loan of £15,000,000 to be used to refund the earlier obli- 
gations. 

The essential features of this loan and the contract which accom- 
panies it are: 

1. The federal government indorses it with an unqualified guar- 
anty. 

2. The Sao Paulo coffee holdings, amounting now to 6,994,420 
bags, are warehoused in New York and seven European ports, and 
warrants for them are deposited with specific banks, which act as 
trustees for the bondholders. 

3. This coffee is placed under the sole control of a committee of 
seven residents of the United States or Europe, who are given full 
power over its liquidation, saving only a proviso as to minimum sales 
during the next ten or eleven years. 

4. The state of Sao Paulo raises the surtax from 3 to 5 francs per 
bag, and guarantees the application of the proceeds to the sole pur- 
pose of satisfying the interest, amortization, etc., of the loan. 

5. The state likewise agrees to restrict exports to 9,000,000 bags for 
1908-9, 9,500,000 bags for 1909-10, 10,000,000 for succeeding years. 

The placing of this loan marks the official end of the valorization 
experiment. 

In summing up the general results, one must bear in mind both 
the state government and the planters. The credit of the state has 
suffered severely. No proof of this statement is needed beyond the 
fact of the extreme difficulty in raising the final loan and the insistence 
of the financial world that federal guaranty must be secured. Prior 
to 1906 the ability of Sao Paulo to meet its obligations seems to have 
been unquestioned, and it was borrowing freely for many sorts of per- 
manent improvements. The direct financial loss, though extremely 
difficult to estimate, has in all probability reached a sum of several 
millions of dollars. 

The results to the planter are somewhat clearer. Those whoso 
coffee the government purchased undoubtedly reaped a financial 



478 AGRICULTURAL ECONOMICS 

benefit. This benefit was not, however, equal to the excess of price 
over the market price, for a large part of the surtax on export must 
be deducted. 

Other planters suffered to the extent of all that portion of the 
surtax which they were unable to shift, but, on the other hand, they, 
in common with all sellers, profited by the steadying of prices due to 
government purchases. The enormous crop of 1906-7 would unques- 
tionably have demoralized prices, had not the state, or someone else, 
undertaken to hold the surplus. From whatever beneficial effect thus 
produced, must, however, be deducted the loss occasioned by the pre- 
vention of reactionary rise in price such as had always before followed 
periods of depression. The government's policy of giving preference 
in its purchases to the better grades of coffee stimulated efforts, 
already begun, to introduce improved methods. 

The disposal of the surplus stock without too great disturbance 
to the market, yet rapidly enough to prevent deterioration or dis- 
proportionate storage and other charges, and the promise of the state 
government to restrict exportation in spite of increasing crops, present 
problems still full of menace to the industry. The placing of an 
import duty on coffee by the United States would ease the financial 
situation considerably by enabling the trustees to dispose of their 
accumulations in this country at a profit, but it would only increase 
the difficulties of the planters and the Sao Paulo government. 

The whole experience serves to emphasize the dangers of govern- 
ment interference with industry. The state of Sao Paulo came to 
the rescue of its planters in a situation which the latter had created 
by their own shortsightedness. Possibly such action may be partly 
justified in view of the vast importance to the state of that particular 
industry. Possibly, too, it may be said to have been partly successful, 
provided the problems still remaining be solved without further dis- 
aster. Yet, even if partly successful, it has been so only at large 
direct loss to the state government, and serious impairment of its 
credit, and has encouraged producers to rely on government aid rather 
than their own efforts. It is safe to say that the coffee industry will 
not resume a normal and thoroughly satisfactory condition until the 
planters resolve to stand on their own feet. This will involve the 
introduction of better methods all along the line, the closer watching 
of the costs of production, willingness to accept low profits compared 
with those of ten and fifteen years ago, and the elimination of the 
weaker producers: 



PRINCIPLES OF VALUE AND PRICE 479 

Note. — It may be added that the tying up of so large a stock of 
coffee as that which was held at New York under this valorization 
plan was looked upon by our Attorney-General as an improper 
restraint of trade. He accordingly began proceedings against the 
"coffee trust." The relation in which the Brazilian government 
stood to the whole scheme, however, made the situation not a little 
delicate. A satisfactory solution of the difficulty was afforded early 
in 19 13, by the release and sale of the stock then held in trust in 
New York. — Editor. 

151. INVOKING GOVERNMENT AID FOR COTTON PRICES 1 

Mr. Smith, of Georgia, secured consent, October 24, 19 14, to 
introduce in the Senate of the United States the following bill: 

A BILL (S. 6684) TO PROVIDE FOR THE PURCHASE OF 5,000,000 BALES OF LINT 
COTTON, AND FOR OTHER PURPOSES 

Be it enacted, etc., That during the year 1915 a special excise tax is 
hereby levied, and shall be paid and collected not later than December of 
said year, upon every person, firm, or corporation engaging in the business 
of planting, growing, or producing cotton, said tax to be measured as 
follows : 

Every such person, firm, or corporation shall pay a tax of 2 cents a 
pound upon all lint cotton produced or grown by such person, firm, or 
corporation in excess of 50 per cent of the total amount of lint cotton pro- 
duced by such person, firm, or corporation in the year 19 14: Provided, That 
where any such person, firm, or corporation was not engaged in the business 
of planting, growing, or producing cotton in the year 19 14, such person, 
firm, or corporation shall pay a tax of 2 cents a pound on all lint cotton 
produced by such person, firm, or corporation in excess of 50 per cent of 
the total amount of lint cotton produced in the year 19 14 on the farm or 
plantation operated by such person, firm, or corporation in the year 191 5. 

The Secretary of the Treasury is hereby authorized to make all neces- 
sary rules and regulations for the collection of the tax herein provided for. 

Sec 2. That the Secretary of the Treasury is hereby directed to have 
immediately prepared bonds of the United States to the amount in face 
value of $250,000,000. The said bonds shall be in denominations ranging 
from $10 to $500, and shall be made due on or before three years from date. 
and bear interest at 4 per cent per annum, and shall be payable in gold. 

Sec 3. That the said bonds shall be used at their face value for the 
purchase of 5,000,000 bales of lint cotton, payments to be made in said 
bonds to the sellers of such cotton, and the Secretary of the Treasury, the 

1 From Congressional Record, 63d Congress, 2d session, 18719-22, 



480 AGRICULTURAL ECONOMICS 

Postmaster General, and the Secretary of Agriculture are hereby consti- 
tuted a board with authority to conduct such purchases and to carry out the 
provisions of this act in connection with the purchase, handling, and sale 
of said cotton. 

The said purchases shall be made exclusively from the producers of 
such cotton at the price not to exceed 10 cents per pound for middling lint 
cotton and shall be made as rapidly as possible. Other grades of cotton 
may be bought at prices higher or lower than 10 cents, based on the differ- 
ence of their values, as the same are more or less valuable than middling 
cotton. The purchases shall be made in the States where the cotton is 
grown, and shall be prorated between the States, as far as practicable, 
according to the quantity of cotton grown in each State. The cotton so 
purchased shall be handled under the direction of the board hereinbefore 
provided for, and none of the same shall be disposed of earlier than Janu- 
ary i, 1 916. During the year beginning January 1, 19 16, said cotton may 
be sold in blocks of 100 bales or more at the market price. On and after 
January 1, 19 17, so much of said cotton as has not already been disposed 
of shall, within six months thereafter, be sold by said board. The money 
received from the sale of said cotton shall be kept separately in the Treasury 
and shall be used to pay off the bonds provided for in section 2 of this act, 
and whenever $5,000,000 has been accumulated from the sale of said cotton, 
blocks of said issue of bonds shall be called in and redeemed, and said board 
is given full power and authority to make such rules and regulations as are 
necessary for the purpose of executing the provisions of this and the pre- 
ceding sections. 

Sec. 4. That after the cotton the purchase and sale of which is pro- 
vided for in sections 2 and 3 of this ac,t has been disposed of it shall be the 
duty of the said board to prepare a statement covering the entire expendi- 
ture by the Government in connection with said transactions, including the 
redemption of said bonds, and if any part of said expenses has not been met 
it shall be the duty of said board to officially report the amount remaining 
unpaid, and said report shall be filed with the Commissioner of Internal 
Revenue. For the year 1917, and annually thereafter, a special tax is 
hereby levied and shall be paid and collected during the months of August, 
September, October, November, and December upon every person, firm, 
or corporation engaging in the business of planting, growing, or producing 
cotton, said tax to be measured as follows: 

Every such person, firm, or corporation shall pay on all cotton produced 
or grown by such person, firm, or corporation during each of said years an 
amount equal to 1 cent per pound on such cotton, and the same shall 
be payable before said cotton leaves the ginhouse: Provided, however, That 
if the report of said board filed with the Commissioner of Internal Revenue 
shows that no amount remains unpaid, the excise tax provided for in this 
section shall not be collected: And provided further, That no tax shall be 



PRINCIPLES OF VALUE AND PRICE 481 

collected under this section except for the balance of the amount remaining 
unpaid as provided for in this section. 

Sec. 5. That the sum of $1,000,000, or so much thereof as may be 
necessary, is hereby appropriated and made immediately available, under 
the direction of the said board, for the purpose of carrying into effect the 
provisions of sections 2 and 3 of this act 

Mr. Smith, of Georgia: — Mr. President, we have brought to the 
attention of the Senate certain facts which involve especially the 
welfare of twenty millions of people, citizens of our country, and 
the welfare of the entire country. We have shown to the Senate that 
the loss of our European market for cotton has left this country with 
a crop of 15,000,000 bales, and with a market of for 5,000,000 bales 
destroyed by the European war. We have shown that our own citi- 
zens have in no way been responsible for this condition; that it is 
not a normal case of overproduction and under-demand, but is a 
normal production with the demand destroyed by a foreign war. 
This bill varies but little from the amendment that was offered to 
the war-tax bill. The important change is that, instead of simply 
specifying 10 cents a pound as the price at which the government 
was to exchange the bonds for 5,000,000 bales of cotton, it provides 
that the exchange is to be made at the market price, not to exceed 
10 cents a pound. In presenting it, I wish to say that, in my opinion, 
the withdrawal of 5,000,000 bales from the market would put the price 
on all the balance of the cotton at about 10 cents a pound. We 
brought to the attention of the Senate the fact that a week before 
war was declared in Europe middling lint cotton was selling for 13J 
cents a pound: that for the past five years it sold for an average of 
i2f cents a pound, and for the past ten years for over 12 cents a 
pound average. 

152. CORNERING THE MARKET 1 ' 

In the middle of April the price of wheat rose, after some weeks 
of spectacular advances, to war and famine figures. Millers actually 
in the Kansas wheat belt were forced to pay $1 . 50 per bushel. The 
Liverpool market recorded the highest price in thirty years. The 
Chicago price of $1.29! for wheat to be delivered in May has been 
exceeded only five times since the period of our depreciated currency. 
The exciting cause of this rocket advance was the speculation for the 

1 Adapted from the American. Review of Reviews, XXXIX. May 1000, 529-30. 






482 AGRICULTURAL ECONOMICS 

rise by Mr. James A. Patten, of Chicago, and his followers. Back 
of the manipulation by these daring speculators was a short crop in 
the Argentine Republic, due to December frosts, which reduced the 
amount of wheat that could be exported to feed Europe, the large 
needs of Europe itself, her short acreage, and probably the small 
supply of wheat on hand in the world left over from last year's harvest, 
though there are conflicting theories on this last point. 

Getting a sense of this situation last fall, Mr. Patten bought dur- 
ing last winter and this spring some twenty million bushels of wheat 
to be delivered in May, paying probably, not much more than $i .00 
per bushel. At the same time, opposing speculators who had not a 
correct sense of the situation were selling "short" wheat for May 
delivery as the price rose to figures which seemed to them more and 
more unjustified. When the short sellers became frightened at the 
apparent correctness of Mr. Patten's theories, and attempted hastily 
to buy in enough wheat to carry out their sales, the pyrotechnics of 
April resulted the more rapidly because of the farmers' unwillingness 
to sell until the top of the rising prices was reached. 

With flour selling at $7 . 00 to $7 . 20 per barrel, numerous requests 
have been sent to Congress asking that a federal law should be passed 
prohibiting such operations as Mr. Patten's bulling of wheat "futures." 
If Mr. Patten is right in his assertion that the supply of wheat is 
inadequate to meet the world's demand, it is obvious that federal 
prohibition of speculation would have no final effect on the size and 
price of the consumer's loaf of bread. And if Mr. Patten is wrong, 
the history of attempts to "corner" wheat markets suggests that he 
and his fellow-speculators will certainly be overwhelmed by a flood 
of wheat coming from the farmers' stores to break the price which 
has been momentarily held at an artificially high level. 1 

153. BUYING TRUST AND PRODUCERS' POOL 2 
By ANNA YOUNGMAN 

The farmer, both because of his situation and because of certain 
peculiarly distinctive features of agriculture, has usually been con- 
ceived of as a permanently isolated producer. Yet the farmer is not 

1 As a matter of fact, this speculative movement was carried to a successful 
conclusion. Subsequently, Mr. Patten engineered a similar corner in the cotton 
market. The Supreme Court decided that this latter enterprise operated in 
restraint of trade and was in violation of the Sherman Anti-Trust law. — Editor. 

2 Adapted from the Journal of Political Economy, XVIII, 34-44. 



PRINCIPLES OF VALUE AND PRICE 483 

altogether unfamiliar with proposals to combine, nor has he always 
turned a deaf ear to pooling schemes which have been developed for 
his benefit. Lately the farmers in the tobacco-growing districts of 
Kentucky and Tennessee have been aroused against a monopoly, one 
of the most powerful of the industrial trusts, the American Tobacco 
Company. The farmers complain, whether justly or not, that each 
buyer confines himself to a particular region, so as not to compete 
with his fellow-buyers; that the prices at which the leaf will be pur- 
chased are agreed upon after conferences among the buyers; and that 
even the agents of foreign companies are in collusion with the American 
Tobacco Company. The farmers of Kentucky and Tennessee assert 
that this company, by its rank as buyer, can dictate the amounts that 
it will give for leaf, and they further allege that it has used its power 
to depress prices to so low a point that it has been made impossible 
for the tobacco grower to obtain a living. 

Without doubt the price of leaf tobacco has fallen, but it is ques- 
tionable whether the trust can be regarded as entirely responsible for 
that fall. Kentucky, which produced approximately 220,000,000 
pounds of tobacco in 1890, raised over 314,000,000 pounds in 1900, 
and Tennessee increased its production nearly 13,000,000 pounds dur- 
ing the same period. Notwithstanding an increase in per capita 
consumption from 4.6 to 5.5 pounds, it is probably true that an 
excess of supply, quite as much as pressure exerted by the buying 
monopoly, was responsible for the marked drop in prices that occurred 
after 1900. Still, when the trust, or, more specifically, the tobacco 
trust, absorbs all of their buyers and buying agencies and constitutes 
itself purchaser of the farmer's product, he feels abused apart from 
any consideration of the actual injury done him. Here are many 
sellers and only one buyer. He sees no way of making effective his 
cherished ideal of competition. The only way to obtain an equality 
of bargaining power, therefore, is to diminish the number of sellers 
and, to the one powerful buying organization, to oppose a single sales- 
map. So, curiously enough, the farmers' movement has not been 
undertaken with design to crush the American Tobacco Company. 
Instead, an attempt has been made to emulate trust methods and 
thereby to demonstrate that the farmers' pool can be made a redoubt- 
able opponent of the tobacco monopoly. 

The first association of farmers in the dark tobacco district — 
the Planters' Protective Association — was organized at Guthrie, 
Kentucky, in 1904, and was incorporated as a mutual pool with a 



484 AGRICULTURAL ECONOMICS 

capital of $1,000, divided into shares of $1 each. The farmer delivers 
his tobacco to the association prizer, who presses it in hogsheads for 
delivery to authorized warehouses. There it is sampled, and the 
sample sent to the nearest saleshouse and to the headquarters at 
Guthrie. Grades and prices are then put on the tobacco, and it is 
sold at these fixed prices by the salesmen for the association to all 
who wish to buy. The farmer is not permitted to make any individual 
selling contracts nor to dispose of his tobacco at a lower figure than 
the one fixed upon by the accredited grader. 

The Planters' Protective Association has assisted the farmer in his 
efforts to obtain a higher price for his crop, in some instances doubling 
the size of his returns. An evidence of its growing success is the fact 
that, whereas it controlled only 40,000,000 pounds of the crop in 1904, 
it was enabled to obtain about 80,000,000 pounds of the crop 
of 1907. 

Taking example by the experience of the Black Patch, the growers 
of Burley tobacco organized a similar association at Winchester, Ken- 
tucky, in January, 1907. The members of the association agreed to 
deliver their unsold crop of 1906 and the whole of their crop of 1907 
to county boards to be deposited in warehouses and held until buyers 
met their terms. So great was the enthusiasm that the pool obtained 
about one- third of the crop of 1906 and over half the crop of 1907 — 
about 100,000,000 pounds of tobacco in all. 

The farmers secured loans on their warehouse certificates sufficient 
to satisfy their immediate necessities, and were ready to wait until 
the trust was prepared to meet the prices demanded for the pooled 
crops. In the fall of 1907 a conference was held, but the representa- 
tives of the trust believed at that time that they could get all the 
tobacco they needed at lower prices than the Burley society was 
willing to accept. With 100,000,000 pounds of unsold tobacco left 
on their hands, the farmers' situation would be hopeless when the 
1908 crop began to come on the market. But there was one desperate 
remedy and the farmers agreed to take it. The members of the 
Burley society pledged themselves to raise no tobacco in 1908. The 
majority of them fulfilled that pledge, and the result was that 
the society finally succeeded in selling 75 per cent of its pooled crops 
to the American Tobacco Company at a "round" price of 17 cents a 
pound — nearly double the selling price of the leaf prior to the forma- 
tion of the Burley Association. 



PRINCIPLES OF VALUE AND PRICE 485 

F. The Mechanism of the Market as Influencing Prices 

154. SUPPLY AND DEMAND BROUGHT TOGETHER THROUGH 
THE AGENCIES OF THE MARKET 

The diagram on p. 486 is designed to show the central position 
occupied by our market mechanism as a mediating force between 
producers' supplies on the one hand and consumers' demands on 
the other. Beginning at the top of the diagram, and following it 
downward, we pass from natural determinants of what can be pro- 
duced to rational determinants of what shall be produced. The 
"business of farm production" is very much influenced by the char- 
acter and activities of the market. What a particular farmer or a 
given section decides to produce is based very much upon the will- 
ingness which marketmen have indicated to handle one or another 
class of product. Often the dealers give assistance, financial or other, 
in order to stimulate the production of some certain article. 
Transportation, while not strictly a marketing agency, yet occupies 
a highly important intermediate position, determining the possibili- 
ties of bringing any given demand within touch of any particular 
source of supply. We might say that it makes any actual stock an 
effective supply for such a market zone as it reaches. 

If we turn to look at the matter from the side of demand, the 
important influence of the market mechanism again appears. Begin- 
ning at the bottom of the chart, we find demand resting upon condi- 
tions of physiological necessity which are fixed in character. But we 
see, as we look at the other factors in the making of effective demand, 
that there is a considerable field within which the agencies of the 
market are able to modify and direct the character and volume of 
actual market demand. The work of advertising, of making tempting 
displays of certain goods, or of selecting particular articles in whose 
interest the buying public is to be vigorously solicited — all these 
activities of the market go far to modify intellectual estimates or 
social esteem and to determine the distribution of the family income 
to various classes of expenditures or even the relative portion which 
shall be spent or which shall be saved. 

We need to get away from thinking of the process of price-making 
in vague general terms and in the passive voice. It is a very concrete 
process, made up of a large number of personal transactions, and the 
precise conditions under which each of these personal transactions 
takes place are created by the activities of our marketing system. 



4 86 



AGRICULTURAL ECONOMICS 



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PRINCIPLES OF VALUE AND PRICE 487 

155. THE ROLE OF THE CITY FOOD MARKET 1 

Chicago offers a typical illustration of the problem which every 
growing industrial city of the United States is facing today in larger 
or smaller measure. Here we have a large and rapidly increasing 
population made up of consumers who create a demand for the food 
products of the farm. On the supply side, we see Chicago in the 
midst of a great, fertile agricultural domain and at the center of an 
extensive and elaborate system of transportation, which puts her in 
commercial touch with producers of the goods she needs, wherever 
they find it advantageous to carry on such production. Adjustment 
of these two great forces becomes the problem of the day. If 
industrial America is to find it possible to take men from rural pur- 
suits and gather them into town centers, in order to secure greater 
efficiency in manufacturing, more rapid progress in culture, or a 
richer social life, while, on the other hand, agriculturists are to be 
enabled to distribute their efforts over the earth in response to the 
call of natural advantages for production, there must be a system of 
provisioning the cities, which is swift, efficient, and economical. 

It is our task to indicate the function which the market performs 
in determining the precise circumstances under which a particular 
demand is brought in touch with the sources of food supply all over 
the country and even in foreign lands. Only so can we get an under- 
standing of the effect which these arrangements have upon the prices 
which Chicagoans pay for their purchases and that farmers receive 
for their products. 

It is a favorite defense of the produce dealers to assert that their 
business is controlled absolutely by laws of supply and demand and 
that, therefore, if we are not satisfied with the results, we should get 
the city council to " repeal the law of supply and demand," rather 
than frame ordinances to control the commission merchant or the cold 
storage system, or to create a municipal market. Certainly we may 
admit, to a considerable extent, their claim as to the free operation 
of competitive demand and supply. Where great streams of goods 
converge upon a single market and a great concourse of buyers is 
brought together to bid and haggle and buy, the immediate price- 
making process is clearly that of mutual competition and an equilib- 
rium of supply and demand. But to admit this, does not estop us 

1 Adapted from The Chicago Produce Market, an essay to be published shortly 
in the Hart, Schaffner & Marx series. 



488 AGRICULTURAL ECONOMICS 

from our present inquiry. To urge it, is to beg the whole question 
which is the really vital issue for Chicago's consuming public 

For though the local supply and demand are made to strike a 
balance in price, the question still remains as to why it is that that 
particular supply and demand come together. The fact is that it is 
the market itself which determines whether shippers shall find it con- 
venient and profitable to ship their goods to Chicago; it is the market 
which, by its alertness, finds neglected sources of supply or more 
direct, safe, and economical means of bringing goods to the city. 
Likewise, it is the market which, by reason of its quarters or its 
manners, attracts buyers or repels them, reaches all the demand or 
only part, educates taste, alters habits of consumption, creates and 
directs demand. Even if the market be passive in the working out 
of the particular supply and demand into prices, it is a highly active 
force in determining precisely what supply and what demand shall 
be brought together in the city of Chicago. And so we ask: Is our 
produce market rendering the best service at the lowest cost, or does 
it need a broader outlook, better equipment, and a different type of 
organization ? 

J 



IX 

MARKET METHODS AND PROBLEMS 

Introduction 

Here lies the happy hunting-ground of reformers. Every one of 
the main topics of this chapter has been or still is the basis of a con- 
troversy. From ultra-conservative defense of every practice which 
has become established, even accidentally, in the trade, to ultra- 
radical proposals for discarding all the old methods of dealing, evolved 
in the slow growth of our marketing system, each position has its 
champions. But it may not be out of place to suggest that the safest 
method of procedure is first to get an understanding of the precise 
way in which existing systems operate and of what have been the 
circumstances which have brought them into existence or permitted 
them to become established in use. One may then adduce evidence 
that new conditions have arisen which demand a new adjustment of 
marketing arrangements, or may point out wherein the old system 
has always failed to meet fully the needs of the situation. 

With the ground cleared and the issues defined in this fashion 
there is larger hope that proposals of reform will go rationally to the 
real source of existing abuses and inefficiencies and that changes sug- 
gested will be both practicable and efficacious. The method oi work 
outlined in selection 177 deserves careful consideration in this con- 
nection. It may also be suggested that the designer, whether of a 
building, an engine, or a market mechanism, needs to know the 
properties of the forces with which he must deal and be trained in the 
science of his craft. Whoever undertakes to construct a better 
market system must take due account of the principles of value and 
price if he is to bring about the price situations which he desires. It 
is for this reason that so lengthy a presentation of these subjects was 
made in the preceding chapter. 

On the other hand, every theory must be rigorously checked up 
against the concrete facts of actual operating experience. For 
example, the attractive picture of the auction method of sale for a 
large part of our food supplies (selection 163) must not cause us to 
forget that actual attempts to extend the usefulness of this method 

489 



490 AGRICULTURAL ECONOMICS 

of dealing have met with only limited success. The fault is not with 
the theory of the open competitive market, but, apparently, in the 
inability or unwillingness of buyers to come to such a market place, 
or in the irregular supply or uncertain quality of the goods dealt in. 1 
The same practical scrutiny must be given to the numerous plans for 
direct selling by producer to consumer. Likewise, the principle of 
co-operation is simple, briefly stated, and easily understood. But the 
practice of co-operation presents an unending series of problems of 
practical adjustment and readjustment. 

This raises the question of co-operation on a large scale through 
the agencies of government. Section F presents several types of such 
endeavor. Did space permit, we should add also the New York sys- 
tem, under which commission dealers are bonded and licensed by the 
state and a state commissioner of food and markets not only super- 
vises the activities of private dealers, but provides auction markets, 
to which producers can consign their goods. The issue is fairly 
drawn at the present time: Shall the government agency secure and 
furnish information, shall it assist producers to form marketing asso- 
ciations of their own, or shall it actually engage in the active opera- 
tions of the market itself ? 



A. Organized Exchanges 

156. FUNCTIONS OF PRODUCE EXCHANGES 2 
By S. S. HUEBNER 

The produce exchange is not itself organized for the making of 
money, and does not fix prices or make transactions in the trade as 
an organized body. It is merely instrumental in affording a con- 
venient market place, in regulating trade, and in disciplining the 
conduct of its members. The members act on their own responsi- 
bility, doing as much business as they like, provided they conform 
to the standards which the rules of the exchange prescribe for the 
regulation of the trade. 

Practically all the exchanges have adopted disciplinary rules for 
the regulation of brokerage transactions, and the maintenance of a 

1 For an intelligent discussion of the limitations of the auction method, see 
Weld, The Marketing of Farm Products, chap. vii. 

2 Adapted from The Annals, XXXVIII, No. 2 (September, 1911), on "Amer- 
can Produce Exchange Markets," 321-41. 



MARKET METHODS AND PROBLEMS 491 

standard of commercial honor in the trade very much higher than 
would otherwise exist. The greatest care is exercised in electing mem- 
bers, and the new member must agree to abide by the constitution of 
the exchange and all subsequent amendments thereto. Expulsion is 
the penalty in case a member fails to comply with the terms of any 
business obligation or with the award of any committee of arbitration; 
or in case he deals in differences in the fluctuations of the market or is 
connected with any bucket shop. All orders must be executed in the 
open market and no customers' trades can be taken by members for 
their own account, either directly or indirectly, on pain of expulsion. 
Expulsion is also the penalty for making or reporting any false or fic- 
titious purchase or sale, or for being guilty of bad faith, dishonorable 
mercantile conduct, or for any attempt at extortion; and when expelled 
no member may transact business upon the floor in his own name or 
through any broker or employee. No member is allowed, under any 
circumstances, to be both principal and agent in any transaction; nor 
may a member either by his own act or by the act of another member 
or broker be placed in the position of agent for both seller and buyer. 

For the benefit of the trade the exchange regulates the inspection, 
grading, weighing, storage, and shipment of grain, the brokerage 
charges for the various services rendered, and the deposits necessary 
to secure the fulfilment of time contracts. Trade committees are 
appointed for the several kinds of produce, to decide disputes, and 
nterpret the usages prevailing in each. Weighers and inspectors are 
appointed and licensed, and agreements are frequently effected with 
warehousemen and transportation companies. The rights of the 
respective parties in the various kinds of contracts are minutely pre- 
scribed; the settlement of such contracts is outlined in detail; and 
in case of insolvency, the method of procedure is carefully defined. 
Lastly, all business disputes are arbitrated quickly and cheaply. So 
high is the standard of the decisions of the committees of arbitration 
that they are often given the force of law by the highest courts. 

Special reference should be made to the supervision of exchanges 
over the inspection, grading, weighing, and storing of produce, and 
the issuance of "general warehouse receipts" to represent title to the 
same. To make possible the convenient transfer of property from 
buyer to seller by the mere transfer of a receipt calling for a given 
amount of goods of a stated quality it is essential that all the factors 
preliminary to the issuance of such general receipts should be thor- 
oughly supervised, so that the genuineness of their face value will go 



492 AGRICULTURAL ECONOMICS 

unquestioned. This the exchanges are instrumental in doing. The 
system of inspection, grading, and weighing, which they have adopted 
with the assistance of the several state governments, has reached the 
highest standards. Next, the rules of the exchange look to the super- 
vision of the storage of grain in the great collecting and distributing 
centers. According to the Chicago Board of Trade, the owner of an 
elevator whose holdings of grain can be delivered on contracts made 
on its floor must be of unquestioned financial standing, and his books 
are subject to examination by the committee of the exchange. The 
elevator must be of the most improved character, properly situated, 
and with adequate transportation connections. The receipts of such 
a "regular" warehouse are acceptable as a delivery on exchange 
contracts. 

This system of delivery by means of warehouse receipts gives to 
the grain, cotton, and produce they represent the same quality of 
mobility, for purposes of sale or deposit as collateral, as is given to 
corporate property represented by stocks and bonds listed on our 
stock exchanges. If it were not for organized markets and the exist- 
ence of warehouse receipts, the vast quantity of produce lying in 
warehouses and elevators, aggregating hundreds of millions of dollars, 
would not be available for business purposes except in a very crude 
way. At present the greater part of the country's enormous crops 
is purchased from the farmer by warehouse and elevator men during 
the three or four months of the crop moving season, and is then gradu- 
ally sold to the consuming public during the balance of the year. 
The farmers, as a rule, demand immediate cash payment, and this 
requires the expenditure of hundreds of thousands of dollars in excess 
of the available capital of the buyers. This in turn necessitates on 
their part extensive borrowing from bankers against so-called " grain 
paper." It is necessary for the buyers to transact the business on 
credit, and it is estimated that approximately nine-tenths of the 
country's grain and cotton crop is originally purchased with borrowed 
funds. 

To illustrate, we will assume that a grain buyer with $100,000 of 
capital purchases 100,000 bushels of wheat for sale in the East. He 
desires to liberate his capital for new purchases long before he sells 
his present holdings. This he does by having his 100,000 bushels of 
wheat inspected, graded, and represented by a warehouse receipt or 
a bill of lading. He also has the same insured against loss by fire 
and "hedged" on some exchange against loss from a decline in price. 



MARKET METHODS AND PROBLEMS 493 

With this grain paper as collateral security the banker will grant him 
a loan to the extent of about 90 per cent of the value of the grain or 
$90,000 according to our assumption. Our grain buyer may imme- 
diately purchase another 90,000 bushels and, by the same process, 
borrow another $81,000 for further purchases. This operation might 
be continued until his original capital has been entirely or almost 
entirely absorbed in margins. This grain buyer has been enabled, 
through the ease with which grain can be rendered mobile under 
present exchange methods, to do a business seven or eight times as 
large as would be possible under other conditions. The farmer has 
been benefited in that he may dispose of his entire crop within a short 
time, and on a cash basis, irrespective of the immediate demands of 
the consuming world. 

One reason why the bankers lend so readily on grain paper is 
because they know that grain always has a ready market on our pro- 
duce exchanges, thus affording them ample opportunity, if necessary, 
to sell the grain held as collateral before the margin of 10 per cent 
on the loan is exhausted. During every hour of every business day, 
there is always present on our produce exchanges a group of brokers 
and speculators always ready to buy and sell, and so numerous as to 
furnish a continuous market where, in the course of a few minutes 
and with the sacrifice of only a small amount in the price, hundreds 
of thousands of bushels of grain may be either bought or sold. The 
existence of such a continuous market is greatly facilitated by the 
presence of a group of spectators who are willing to buy any supply 
that may be offered, because in their judgment a profit will be derived 
by selling it at a future time. The advantage of such continuous buy- 
ing to the dealer or to the banker has just been explained; but a 
continuous market throughout the year and at reasonably steady 
prices is essential to the farmer also. As stated, farmers realize upon 
the larger part of their crops shortly after harvest, and were it not 
for the large group of buyers who are always willing to take the grain 
with a view to storing it and selling it for future delivery, it would 
necessarily follow that prices would fall extremely low at harvest. 
Mr. Merrill, president of the Chicago Board of Trade, suggests that 
"the testimony of all large grain merchants is that formerly the price 
of handling grain averaged six, eight, and ten cents a bushel, instead 
of an average of a two-cent margin at the present time." Or it may 
happen, as Mr. Merrill explains, that "the farmer may have his crop 
still in the ground, or he may have it upon his farm awaiting a time 



494 AGRICULTURAL ECONOMICS 

when the roads are in a condition to bring it to market, or he may 
have it stored in an elevator at his own expense waiting for a better 
price — yet in each of these cases he can, and usually does, dispose of 
his surplus crops by selling them through a broker upon some board 
of trade for delivery at some future time." 

Produce exchanges also serve as a world's clearing house for trade 
and crop information, and in this respect render an invaluable service 
to producer, middleman, and consumer. All our leading crops are 
produced over such large areas that few individuals have it in their 
power to keep in daily touch with current crop and trade events 
except it be in their own particular locality. The prices of nearly all 
leading cereals are determined by national or world-wide conditions, 
and a favorable or unfavorable condition of a crop in one locality or 
country may be so outweighed by the opposite condition elsewhere 
as to render worthless a price quotation based upon local evidence. 

Today, however, all the leading produce exchanges are in constant 
touch with crop conditions, weather reports, the movements of grain, 
changes in freight rates, the rate of consumption, economic legislation, 
political complications, etc.; and all this information , as currently 
received is given immediate expression in the form of purchases and 
sales at prices which are immediately transmitted by wire to all the 
trade centers, and soon made available to the general public by the 
daily press. 

The value of this prompt and elaborate collection of trade infor- 
mation is fourfold, viz. : 

i. It makes possible the discounting of the future, i.e., it enables 
dealers and speculators to exercise their best judgment at once in the 
form of actual transactions, and thus the effect of a short or bumper 
crop upon prices is reflected, i.e., discounted, long before it would 
otherwise be realized by the general public. 

2. It steadies prices. — The daily discounting of current events 
makes unnecessary, except in rare instances where manipulation has 
interfered with the smooth working of the organized market, a sudden 
decline or rise in prices upon the wide publication of events which 
have been slowly developing. An elaborate statistical study of prices 
for forty years, one-half of which period was before the time of 
exchanges, shows clearly that the fluctuations in the price which the 
farmer received for his grain or cotton was not nearly so great during 
the twenty years when exchange markets were in operation as it was 
prior to their existence. The middlemen who handle the crops use 



MARKET METHODS AND PROBLEMS 495 

the speculative market to eliminate the risk of price fluctuations by 
unloading that risk upon a group of speculators instead of on the 
producer, and thus can give the farmer the best price. 

Without an organized market the farmer would not know the 
price of his grain from day to day, because transactions, if private, 
would not be recorded, might be designed to mislead, and certainly 
would not be representative of the general judgment. He would be 
exposed to a hundred times the fraud of today, when every newspaper 
of any importance in the country gives daily produce quotations for 
the day before. 

The tendency toward steadying price movements is also facilitated 
by the operations of the bear crowd. Short-selling is often of the 
greatest benefit in repressing rampant speculative enthusiasm on the 
one hand, and in checking the effect on prices of excessive pessimism 
on the other. If it were not for the group of short-sellers who resist 
an excessive inflation, it would be much easier than now to raise 
prices through the roof; and then, when the inflation became apparent 
to all, the descent would be abrupt and likely unchecked until the 
basement was reached. 

3. 77 helps to regulate the rate at which the year's crop is consumed. — 
The modern grain and cotton markets are so organized today that 
the distributing interests in the trade are constantly informed as to 
the " visible supply" on hand, which may be defined as being all 
grain, or any given kind of produce, which is stored in warehouses, 
elevators, cars, or boats, and which is available for purchase. Owing 
to the fact that warehouses in all the important distributing centers 
are regulated by law or by the rules of the local board of trade, or 
both, it is possible to collect data periodically as to their holdings. 
These statistics are published regularly in the form of visible supply 
tables and, when viewed in connection with similar statistics of 
former years, will serve as a guide in fixing the price, and by doing 
this exert an effective influence in regulating the consumption of the 
crop. If the visible supply, plus the known stocks of grain still in 
the farmer's hands, is unusually low, it is likely under normal con- 
ditions that the price will be bid up and consumption decrease, and 
if unusually large, it may be expected that prices may decline and 
consumption increase. In this way the movement of prices will 
indirectly benefit the community by regulating consumption so that 
each year's crop, whether large or small, just happens to meet the 
needs of the consuming world. 



496 AGRICULTURAL ECONOMICS 

4. It serves to level prices between different markets. — Reference is 
had here to the practice of " arbitraging " between markets. Arbi- 
traging may be defined as the making of two transactions, one a 
purchase and the other a sale, in different markets or in the same 
market between two different subjects of trade, at about the same 
time, with a view to shaving a profit because the price in the one 
market, or the one subject of trade, is lower than in the other. If 
the arbitrageur knows that wheat is selling lower in Minneapolis than 
Chicago by an amount greater than he thinks ought to be the case, 
in view of transportation and other charges, he can use the low market 
for making an actual purchase of wheat, and at the same time use the 
high market to sell short an equal amount for future delivery during 
some convenient month. He may then transport the wheat from the 
low market to the high market and deliver the same in fulfilment of 
his short sale. Or it may happen that at a given time the quotations 
for wheat on the Minneapolis Chamber of Commerce and the Chicago 
Board of Trade may be "out of line," i.e., the difference between the 
two prices may be an unnatural one in view of the cost of transporta- 
tion and handling which must be taken into account in moving grain 
from one city to the other. In that case the arbitrageur, feeling sure 
that this unnatural difference must soon right itself, may buy a future 
in the low market, selling the same amount short for future delivery 
in the high market. Then, if the two prices come together, he can close 
out both of these transactions, and net as a profit the amount repre- 
sented by the extent that the two prices have come together minus, 
of course, all expenses. Through their constant watchfulness all 
leading markets are kept "in line" with one another. Grain, like 
water, will seek its level. It will move from the center where it is 
plentiful to where it is not plentiful. Instead of chaos we are given 
a harmonious relationship between different markets, between grades, 
between the several monthly delivery periods, and even between 
different kinds of grain. 

157. RULES FOR THE GRADING OF GRAIN 1 

RULE I — WINTER WHEAT 

No. i White Winter Wheat shall include all varieties of pure soft 
white winter wheat, sound, plump, dry, sweet and clean, and weigh not 
less than 58 pounds to the measured bushel. 

1 Prescribed by the State Public Utilities Commission of Illinois. In force 
on and after July 1, 1914. 



MARKET METHODS AND PROBLEMS 497 

No. 2 White Winter Wheat shall include all varieties of soft white 
winter wheat, dry, sound and clean, and shall not contain more than 8 per 
cent of soft red winter wheat, and weigh not less than 57 pounds to the 
measured bushel. 

No. 3 White Winter Wheat shall include all varieties of soft white 
winter wheat. It may contain 5 per cent of damaged grains other than 
skin-burnt wheat, and may contain 10 per cent of soft red winter wheat, 
and weigh not less than 53 pounds to the measured bushel. 

No. 4 White Winter Wheat shall include all varieties of soft white 
winter wheat not fit for a higher grade in consequence of being poor quality, 
damp, musty or dirty, and shall not contain more than 10 per cent of soft 
red winter wheat, and weigh not less than 50 pounds to the measured 
bushel. y 

No. 1 Red Winter Wheat shall be pure soft red winter wheat of either 
or both light and dark colors, sound, sweet, plump and well cleaned, and 
weigh not less than 60 pounds to the measured bushel. 

No. 2 Red Winter Wheat shall be soft red winter wheat of either or 
both light and dark colors, sound, sweet and clean, shall not contain more 
than 5 per cent of white winter wheat, and weigh not less than 58 pounds 
to the measured bushel. 

No. 3 Red Winter Wheat shall be sound, soft red winter wheat of 
either or both light and dark colors, not clean or plump enough for No. 2, 
shall not contain more than 8 per cent of white winter wheat, and weigh 
not less than 55 pounds to the measured bushel. 

No. 4 Red Winter Wheat shall be soft red winter wheat of either or 
both light and dark colors, shall contain not more than 8 per cent of white 
winter wheat. It may be damp, musty, or dirty but must be cool, and 
weigh not less than 50 pounds to the measured bushel. 

No. 1 Hard Winter Wheat shall include all varieties of pure, hard 
winter wheat, sound, plump, dry, sweet and well cleaned, and weigh not 
less than 61 pounds to the measured bushel. 

No. 2 Hard Winter Wheat shall include all varieties of hard winter 
wheat of either or both light and dark colors, dry, sound, sweet and clean, 
and may contain not more than 25 per cent of soft red winter wheat, and 
weigh not less than 59 pounds to the measured bushel. 

No. 3 Hard Winter Wheat shall include all varieties of hard winter 
wheat of either or both light and dark colors, not clean or plump enough 
for No. 2, and may contain not more than 25 per cent of soft red winter 
wheat, and weigh not less than 56 pounds to the measured bushel. 

No. 4 Hard Winter Wheat shall include all varieties of hard winter 
wheat of either or both light and dark colors. It may be damp, musty 
or dirty, and may contain not more than 25 per cent of soft red winter 
wheat, and weigh not less than 50 pounds to the measured bushel. 



AGRICULTURAL ECONOMICS 



RULE H — SPRING WHEAT 



(Includes Hard Spring Wheat, Northern Spring Wheat, Spring Wheat, 
White Spring Wheat, Durum Wheat, and Velvet Chaff Wheat. — Editor.) 

RULE in — WESTERN RED, WHITE AND HARD WHEAT 

(Applies to wheat grown in the states of Montana and Idaho, and on 
the Pacific slope, except where the quality of this wheat is substantially 
the same as that of wheat grown in more easterly territory. — Editor.) 

RULE IV — MIXED WHEAT 

Mixed Wheat — In case of an appreciable mixture of hard and soft 
wheat, red and white wheat (except as provided in the rule of hard winter, 
red winter, white winter and Northern spring wheat), durum and spring 
wheat, any of them with each other, it shall be graded according to the 
quality thereof, and the kind of wheat predominating shall be classed as 
Nos. i, 2, 3, and 4 mixed wheat, and the inspector shall make notation 
describing its character. 

RULE V — CORN 

The following maximum limits shall govern all inspection and grading 
of com: 



Grade Classification 

White, Yellow, and Mixed 

Corn 



Maximum Percentages of 



Moisture 



Damaged Corn 



Foreign Material 
Including Dirt, 

Cob, Other 
Grains, Finely- 
Broken Corn, 
etc. 



"Cracked" Corn, 

Not Including 

Finely Broken 

Corn (See 

General Rule 9) 



No. I ... . 

No. 2 . . . . 

No. 3 

No. 4 . . . . 
No. 5.... 
No. 6.... 
"Sample" 



14.0 
15-5 
17-5 
19-5 
21.5 
23.0 



4~ 
6* 

8f 
ioft 

i5l 



See General Rule No. 6 for Sample Grade 



* Exclusive of heat damaged or mahogany kernels. 

t May include heat damaged or mahogany kernels not to exceed J per cent. 

tt May include heat damaged or mahogany kernels not to exceed 1 per cent. 

f May include heat damaged or mahogany kernels not to exceed 3 per cent. 



GENERAL RULES 

i. The Corn in Grades No. i to No. 5, inclusive, must be sweet. 

2. White Corn, all grades, shall be at least 98 per cent white. 

3. Yellow Corn, all grades, shall be at least 95 per cent yellow. 

4. Mixed Corn, all grades, shall include corn of various colors not 
coming within the limits for color as provided for under white or yellow 
corn. 



MARKET METHODS AND PROBLEMS 499 

5. In addition to the various limits indicated, No. 6 corn may be 
musty, sour, and may also include corn of inferior quality, such as immature 
and badly blistered. 

6. All corn that does not meet the requirements of either of the six 
numerical grades by reason of an excessive percentage of moisture, damaged 
kernels, foreign matter or "cracked" corn; or corn that is hot, heat dam- 
aged, fire burnt, infested with live weevil, or otherwise of distinctly low 
quality, shall be classed as sample grade. 

7. In No. 6 and sample grade, reasons for so grading shall be stated 
on the inspector's certificate, 

8. Finely broken corn shall include all broken particles of corn that 
will pass through a perforated metal sieve with round holes nine-sixty- 
fourths of an inch in diameter. 

9. "Cracked" corn shall include all coarsely broken pieces of kernels 
that will pass through perforated metal sieve with round holes one-quarter 
of an inch in diameter, except that the finely broken corn as provided for 
under Rule 8 shall not be considered as "cracked" corn. 

10. It is understood that the damaged corn; the foreign material 
including pieces of cob, dirt, finely broken corn, other grains, etc., and 
the coarsely broken or "cracked" corn, as provided for under the various 
grades, shall be such as occur naturally in corn when handled under good 
commercial conditions. 

n. Moisture percentages, as provided for in these grade specifications, 
shall conform to results obtained by the standard method and tester as 
described in Circular 72, Bureau of Plant Industry, U.S. Department of 
Agriculture. 

(Rules VI to X, inclusive, deal with Kaffir Corn, Milo Maize, Oats, 
Rye, and Barley, respectively. — Editor.) 

RULE XI — GENERAL RULES — SAMPLE GRADES 

All wheat, barley, oats, rye and corn that is in a heated condition, 
souring or too damp to be safe for warehousing, or that is badly bin-burnt, 
fire burnt, fire smoked, or badly damaged, mixed with garlic, onions, or 
containing live weevil, exceedingly dirty, or where different kinds of grain 
are badly mixed with one another, shall be classed as Sample Grade, and 
the Inspector shall make notations as to quality and condition. 

RULE XII — PEES FOR INSPECTION 

The Chief Inspector of Grain is hereby authorized to collect on all 
grain inspected under his direction as follows: 

For In-Inspection: 50 cents per car load; 10 cents per wagon or 
cart load; 50 cents per 1,000 bushels from boats; one-quarter of a cent 
per bushel from bags. 



500 AGRICULTURAL ECONOMICS 

For Out-Inspection: 50 cents per 1,000 bushels, and 10 cents per 
wagon load to teams. 

Note — The inspection department shall, in no case, make a grade of 
grain above that of the poorest quality found in any lot of grain inspected, 
when it has evidently been plugged for the purpose of deception, or other- 
wise improperly loaded. 

Note — Wheat which has been subjected to scouring, or clipping, or 
any process equivalent thereto, shall not be graded higher than No. 3. 

Note — Spring Wheat, which if cleaned would be good enough to grade 
No. 1 hard, No. 1 or No. 2 Northern, No. 1 or No. 2 Velvet Chaff, No. 1 
or No. 2 Durum, and all mixtures of these different varieties of Spring 
Wheat that would, if cleaned, grade No. 2 or better, shall be given these 
grades, subject to a dockage per bushel equal to the weight of the dirt, seeds 
and foreign grain that would have to be removed by cleaning in order to 
entitle the wheat to the grade given it. The dockage to be ascertained in 
the customary manner by the use of sieves. 

Note — The word "NEW" shall be inserted in each certificate of 
inspection of a newly harvested crop of oats until the fifteenth day of 
August; of rye, until the first day of September; of wheat, until the first 
day of November, and of barley, until the first day of November of each 
year. 

This change shall be construed as establishing new grades for the times 
specified, to conform to the existing grades of grain in all particulars (except 
the distinctions hereby established between the new and the old crop), 
and shall apply to grain inspected from store for two months after the time 
respectively above specified. 

Note — All inspectors shall make their reasons for grading grain, when 
necessary, fully known by notations on their records. The weight alone 
shall not determine the grade. 

Note — All inspectors must ascertain the weight per measured bushel 
of each lot of wheat inspected by them and report the same in their records. 

John P. Gibbons, Chief Inspector of Grain 

158. THE MEANING OF "BASIS" CONTRACTS 1 

Sec. 3. On contracts for grain or flaxseed for future delivery the 
tender of a higher grade of the same kind of grain or flaxseed than the 
one contracted for shall be deemed sufficient. All contracts made for 
Wheat hereafter, unless otherwise specified, shall be understood as 
for "Contract" wheat, and on such contracts a tender of No. 1 Red 
Winter Wheat, No. 2 Red Winter Wheat, No. 1 Northern Spring 
Wheat, No. 1 Hard Winter Wheat, or No. 2 Hard Winter Wheat, and 

1 From Rule XXII of the Chicago Board of Trade. 



MARKET METHODS AND PROBLEMS 501 

on and after July 1, 19 13, No. 1 Velvet Chaff Wheat, in such propor- 
tions as may be convenient to the seller, subject, however, to the 
provisions of Section 5 of Rule XXI, shall be deemed a valid 
tender. 

For delivery on and after July 1, 19 14, all contracts for corn, 
unless otherwise specified, shall be understood as for " contract " corn 
and on such contracts a tender of the following described grades of 
corn in such proportions as may be convenient to the seller, but in 
no case an amount less than 1,000 bushels of any one grade in one 
elevator, shall be deemed a valid tender at the price differences men- 
tioned in the following schedule, subject, however, to the provisions 
of Section 5 of Rule XXI: 



at I cent per bushel over contract price. 



No. 1 White Corn 
No. 2 White Corn 
No. 1 Yellow Corn 
No. 2 Yellow Corn 

No. 1 (Mixed) Corn 

;_,. .' } at contract price. 

No. 2 (Mixed) Corn J 

No. 3 White Corn \ , , , , ^ , 

__ ° ,_ „ _ ; > at 2 cents per bushel under contract price. 

No. 3 Yellow Corn J 

No. 3 (Mixed) Corn — at 2\ cents per bushel under contract price. 

No. 4 White Corn 1 ' , . , 

«. v n p 1 at 4^ cents per bushel under contract price. 

No. 4 (Mixed) Corn — at 5 cents per bushel under contract price. 

Provided that No. 4 Corn of the new crop can be delivered 
only during the months of November, December, January, and 
February. 

The above grades of corn to conform to the standards established 
by the U. S. Government effective July 1, 19 14. 

All contracts for oats, unless otherwise specified, shall be under- 
stood as for " Contract" oats, and on such contracts a tender of No. 1 
White Oats, No. 2 White Oats, No. 3 White Oats, or Standard Oats, 
in such proportions as may be convenient to the seller; subject, how- 
ever, to the provisions of Section 5 of Rule XXI of the Rules of the 
Board of Trade of the City of Chicago, shall be deemed a valid tender 
of " Contract" oats; provided, however, that No. 3 White Oats can 
be delivered as " Contract" oats only at a deduction of five cents per 
bushel from the contract price. 



502 AGRICULTURAL ECONOMICS 

159. HEDGING TO PROTECT TRADE PROFITS 1 
By HENRY CROSBY EMERY 

The trader is primarily concerned with getting a profit from differ- 
ences of price in different markets. He buys in the producer's market 
and sells in the consumer's. This difference between markets is con- 
stant and normal, and constitutes the reward for the services of the 
middleman. To insure such normal profits, their desire is to escape 
the risks of fluctuation within the same market. This, to a large 
extent, the speculative market enables them to do. In the first place, 
the holder of any commodity may sell it to a speculator, if he fears 
a coming fall in value, or a buyer can buy of a speculator for future 
delivery any actual commodity he needs, if he fears a rise. But the 
speculative market affords a better method of insurance by means 
of " hedging" transactions. Under this method, for every trade 
transaction a corresponding transaction of the opposite kind is made 
in the speculative market. If a man buys for trade purposes, he sells 
short on the exchange an equal amount, and covers this short line as 
soon as he disposes of his first purchase. He has made two equal and 
opposite transactions, and if the price moves either way he loses on 
one and gains on the other. In this way he makes himself largely 
independent of speculative fluctuations. The details of this practice 
may be seen from a hypothetical case given by A. C. Stevens, in the 
Quarterly Journal of Economics (Vol. II, p. 50). Though simpler than 
many actual transactions, it admirably illustrates the principle 
involved: 

A New York merchant buys 100,000 bushels of No. 1 hard wheat at 
Duluth, and orders it shipped by vessel to Buffalo, to go thence to New York 
by canal. He does this not because he "wants the wheat for his own use," 
but as a merchant who believes that the Duluth price and the cost of getting 
the grain to New York, in view of known or apparent market conditions 
or of anticipated requirements abroad, will enable him to sell the grain in 
New York at a profit. With a more primitive view, he would ship his 
grain, wait until it arrived, look for a purchaser, and, finding one, sell the 
wheat at the price current at date of arrival — say three weeks after he 
bought it. If at a profit, well and good; but if the price had declined, he 
would sustain a heavy loss, owing to the size of the shipment. Thus, when 
the world's requirements are for larger available stocks, and the movement 

1 Adapted from "Speculation on the Stock and Produce Exchanges of the 
United States," Columbia Studies in History, Economics, and Public Law, VII, 
441-44. 






MARKET METHODS AND PROBLEMS 503 

of grain must be in large lots, the future contract comes in to protect the 
handler. The New York merchant, therefore, sells 100,000 No. 2 spring, 
September delivery, at Chicago at the date of his Duluth purchase, in 
August. When the wheat reaches Buffalo the price has advanced and 
millers there want some No. 1 hard wheat. He sells them 25,000 bushels 
and buys 25,000 bushels of No. 2 spring wheat at Chicago, September 
delivery, to make good the original quantity purchased. By this time he 
has also sold at New York 100,000 bushels, September delivery, to an 
exporter and bought 100,000 bushels more at Chicago, relying on the 
75,000 bushels on the way and his ability to get 25,000 bushels more before 
it is demanded, to keep his engagement. When the 75,000 bushels of No. 1 
hard spring wheat reaches New York the price has declined fractionally, 
and the owner is enabled, in consequence, to purchase 25,000 at a slightly 
better price, relatively, than he had paid in Duluth, selling 25,000 bushels 
coincidently at Chicago for September delivery. He lost on his Duluth 
purchase and on the 25,000 and 100,000 bushel purchase at Chicago, and 
on the 2 5,000 bushel purchase at New York. But he made rather more than 
corresponding gains through his sale, spot delivery, of 25,000 bushels at 
Buffalo, including profits on his sales of 225,000 bushels for September 
delivery at Chicago and New York, so that he gains on sales of 250,000 
bushels and loses on the purchases of 250,000. The transaction as a whole 
is not very profitable, but millers at home and abroad get wheat at the 
lowest market prices at dates of purchases, the grain is moved from Minne- 
sota elevators to Buffalo and New York and the Glasgow mill, and the 
merchant whose sagacity, energy, and foresight led him to aid in the under- 
taking, even when price conditions were unfavorable, is able to protect 
himself from excessive loss without depressing the price to the original 
holder, who represents the grower, and without having as incentive (not 
to mention the ability) to unduly advance the price to the consumer, as 
represented by the miller. 

The same method is adopted by the elevator men, the exporters, 
and the manufacturers. Millers own large stores of wheat in country 
and terminal elevators, which are insured by the same process. As 
soon as the miller buys in the country, or elsewhere, for grinding pur- 
poses, he sells an equivalent amount by telegraph on some exchange. 
Then when he disposes of his flour, he covers at the same moment his 
hedging sales by corresponding purchases. Since flour in the main 
fluctuates with the value of wheat, this affords nearly complete pro- 
tection. The manufacturer of cotton, on the other hand, usually 
protects himself by purchases. Spinners do not hold such large 
stocks of their raw material as do the large millers, and often sell their 
product for delivery at home or abroad at some future time, while 



504 AGRICULTURAL ECONOMICS 

not in possession of any cotton at the moment. Immediately on 
placing such an order, purchases of the required amount of cotton 
may be made on the Cotton Exchange, and as soon as the spot cotton 
for manufacture is secured, the long interest on the exchange is sold 
out. The spinner is insured by his purchases, as the miller by his sales. 
This practice of hedging is now universal in the trade in grain and 
cotton. Not to hedge is considered the most reckless kind of business 
among large dealers and miUers. That is, the man who keeps out 
of the speculative market is said to be a speculator. The spinner 
however, uses the "future" market much less than the dealer or 
miller. Dealers and exporters hedge all their purchases. Nine- 
tenths of the cotton shipped to Liverpool is hedged there or in New 
York. Probably over 90 per cent of the great wheat holdings in the 
elevators of Duluth and Minneapolis are sold against in this way. 
Some of the most prominent elevator men of Chicago claim that every 
bushel which they buy for storage is invariably protected by a hedging 
sale. It may be that the men who control the elevator companies are 
independently "plungers" in the market, but this has nothing to do 
with their regular elevator business. Some millers or elevators may 
also carry a small amount, as a legitimate speculation; but in the 
main the rule of the trade is to insure everything at all times and 
under all circumstances. 

160. THE EFFECT OF SPECULATION IN WHEAT AND COTTON 1 

Let us review briefly the usual dealings in the speculative market 
and notice the effect of the operations of the two sides constantly 
working the market in opposite directions, the "bulls" and the 
" bears." Let us first follow the action of a " bear " who sells October 
wheat in July, hoping for a fall in prices or, as some would have it, 
hoping to depress prices. The immediate effect of such a future sale 
upon July spot prices will be practically nil, for the October wheat 
cannot satisfy the immediate demand for spot wheat. What effect 
will the sale have on prices of spot wheat in October? The "short 
seller" of July now appears as a buyer in order to cover his contracts, 
and, if his trading has any effect on the market at all, it is to increase 
the demand, not the supply. As far then as he can influence spot 
prices, i.e., prices paid to the producer, it will be in favor of higher 
prices and not lower. If the conditions of the market are such as to 

1 Adapted from Report of the Industrial Commission, VI, 189-91, 224. 



MARKET METHODS AND PROBLEMS 505 

result in low prices, that is, to the " short seller's" advantage, then, 
because they are such, he must hasten to buy up the necessary amount 
of wheat which he originally undertook to deliver during that month ; 
and, by so doing, he and his fellow "bears " create an increased demand 
which checks the prevailing tendency to lower prices. Thus, while 
the short seller may at times be in a position to depress future prices 
by creating a fictitious oversupply, when it comes to spot prices, i.e., 
the only prices which are of any practical interest to the farmer, the 
"bear" appears as a buyer and thereby, if at all influencing prices, 
must raise them. 

Let us look now at the "bull" side of the market. The "long" 
has bought a quantity of wheat in July to be delivered to him by the 
"short" in October. Again, as in the case of the "bear," the trans- 
action will have no effect upon current spot prices. Even if we were 
to admit that the speculative purchases and sales for future delivery 
could effect current spot prices, the opposite effect of the transactions 
of the "bull" and the "bear" would balance each other. What will 
be the effect of the transaction on spot prices in October? The 
original "long" appears now as a seller in liquidating his purchases, 
and to that extent apparently increases his supply and forces down 
prices. But it is only apparently, for in reality he cannot add one 
grain to the actual supply on the market. The wheat he is ready to 
sell has just been delivered to him by the original short seller, and 
would have just as surely been offered for sale by the farmer if there 
were no short sellers and long buyers in existence. It may be urged 
that the same quantity of wheat which would have been sold but once 
by the farmer is now offered first by the farmer to the short seller, 
next by the short seller to the long buyer, and finally by the latter 
again to somebody else, thus swelling the apparent supply and tending 
to lower prices. But in all such cases the fictitious supply has been 
met by a fictitious demand, which have all been balanced long before 
the month for which the contract has been concluded has arrived. 

The professional speculator is in the market not for the purpose 
of either depressing or raising prices. He is as ready to make money 
on a rise as on a fall in prices. In either case he would try to ascer- 
tain what the probable tendency of the market is before he embarks 
on any undertaking. No speculator or clique of speculators in their 
senses would undertake to try to depress prices in the face of a rising 
market. The repeated failures both of "bull" and of "boar" cliques 
have not only served to teach speculators a lesson and thus diminish 



506 AGRICULTURAL ECONOMICS 

the number of such ventures, but are also the best proof that the 
"bear" is by no means the only factor in the market. Such being 
the case, the short seller in making his contracts — say in October, the 
month during which the farmer disposes of most of his produce — for 
future delivery a few months hence, will discount all past and future 
conditions that may be foreseen when fixing the price for future 
delivery. As a matter of fact the October price of December wheat 
is always higher than the October price of spot wheat; likewise the 
December price of May wheat is always higher than the December 
price of spot wheat. 

The difference in speculative prices or future bids at different 
places must necessarily conform to the same general rule, that the 
difference between prices for the same article in two markets tends to 
equal the cost of transportation between them. The conclusion to 
which we are led is substantially this, that the speculative system has 
to consider two kinds of values in the commodities it deals with, 
namely, place values and time values. Place values vary by the 
difference, for example, between the value of a bushel of wheat at 
one place (Chicago) and another (Liverpool), or of a pound of cotton 
at one place (New Orleans) and another place (Liverpool). By time 
value is meant the difference between the value of a commodity (as 
cotton or wheat) at one time (July) and at another time (October). 
The difference in place value, in the long run, where surplus capital 
is plentiful, tends to conform to the cost of carriage between the two 
places, the cost of carriage including all elements of expense for dis- 
tribution. Time values, on the other hand, differ according to the 
degree of correctness of the judgment of the speculative dealer whose 
business it is to foretell the factors and conditions that are likely to 
influence the course of future prices. Inevitably the few of best fore- 
sight into future conditions are going to make the most money. Their 
fortune lies in foreseeing in advance of others the point at which price- 
making factors are going to find their focus. 

161. THE UNITED STATES COTTON FUTURES'ACT 1 

Section i. [Short title.] 

Sec. 2. [Definitions.] 

Sec. 3. That upon each contract of sale of any cotton for future 
delivery made at, on, or in any exchange, board of trade, or similar 
institution or place of business, there is hereby levied a tax in the 

1 Abridged by the editor. 



MARKET METHODS AND PROBLEMS 507 

nature of an excise of 2 cents for each pound of the cotton involved 
in any such contract. 

Sec. 4. [Contract must be in writing, showing terms of contract, 
names and addresses of the parties, and quantity of cotton.] 

Sec. 5. That no tax shall be levied under this Act on any con- 
tract of sale mentioned in section three hereof, if the contract comply 
with each of the following conditions: 

First. Conform to the requirements of section four of, and the 
rules and regulations made pursuant to, this Act. 

Second. Specify the basis grade for the cotton involved in the 
contract, which shall be one of the grades for which standards are 
established by the Secretary of Agriculture except grades prohibited 
from being delivered on a contract made under this section by the 
fifth subdivision of this section, the price per pound at which the 
cotton of such basis grade is contracted to be bought or sold, the date 
when the purchase or sale was made, and the month or months in 
which the contract is to be fulfilled or settled: Provided, That middling 
shall be deemed the basis grade incorporated into the contract if no 
other basis grade be specified 

Third. Provided that the cotton dealt with therein or delivered 
thereunder shall be of or within the grades for which standards are 
established by the Secretary of Agriculture 

Fourth. Provide that in case cotton of grade other than the 
basis grade be tendered or delivered in settlement of such contract 
the differences above or below the contract price which the receiver 
shall pay for such grades other than the basis grade shall be the actual 
commercial differences determined as hereinafter provided. 

Fifth. [Cotton that is below the grade of Good Ordinary or, if 
tinged, cotton that is below Low Middling, or, if stained, cotton that 
is below Middling, or cotton that is less than seven-eighths of an inch 
in length of staple, or cotton of perished staple or of immature staple, 
"gin cut" or reginned, "repacked," "false packed," "mixed packed," 
or "water packed" shall not be delivered iraettlement of such con- 
tract.] ^ 

Sixth. [Deliver full number or weight of bales called for, five 
days' written notice of date of delivery, written certificate of grade 
of each bale, identifying marks, etc.] 

Seventh. [Disputes settled by Secretary of Agriculture.] 

Sec. 6. That for the purpose of section five of this Act the differ- 
ences above or below the contract price which the receiver shall pay 



508 AGRICULTURAL ECONOMICS 

for cotton of grades above or below the basis grade in the settlement 
of a contract of sale for the future delivery of cotton shall be deter- 
mined by the actual commercial differences in value thereof on the 
sixth business day prior to the day fixed .... for delivery of cotton 
on the contract, established by the sale of spot cotton in the market 
where the future transaction involved occurs and is consummated if 
such market be a bona fide spot market [otherwise, the average of 
five places that are spot markets, etc.]. 

Sec. 7. [Only those markets shall be considered bona fide spot 
markets which the Secretary of Agriculture shall designate.] 

Sec. 8. [Secretary shall consider only such markets as handle 
such volume and under such conditions as to reflect accurately the 
value of middling cotton and the other official grades, etc.] 

Sec. 9. That the Secretary of Agriculture is authorized, from 
time to time, to establish and promulgate standards of cotton [to be 
known as the "Official Cotton Standards of the United States"]. 

Sec. 10. That no tax shall be levied under this Act on any con- 
tract of sale mentioned in section three hereof, if the contract comply 
with each of the following conditions: 

First. Conform to the rules and regulations made pursuant to 
this Act. 

Second. Specify the grade, type, sample, or description of the 
cotton involved in the contract, the price per pound at which such 
cotton is contracted to be bought or sold, the date of the purchase or 
sale, and the time when shipment or delivery of such cotton is to be 
made. 

Third. Provide that cotton of or within the grade or of the type, 
or according to the sample or description, specified in the contract 
shall be delivered thereunder, and that no cotton which does not con- 
form to the type .... etc shall be tendered or delivered 

thereunder. 

Fourth. Provide that the delivery of cotton under the contract 
shall not be effected by^neans of " set-off " or "ring" settlement, but 
only by the actual traSfer of the specified cotton mentioned in the 
contract 

This Act shall not be construed to impose a tax on any sale of 
spot cotton 

Sec. 11. That upon each order .... for the making of any 
contract of sale of cotton grown in the United States for future delivery 
.... in any exchange .... in any foreign country, th^re is hereby 



MARKET METHODS AND PROBLEMS 509 

levied an excise tax at the rate of 2 cents for each pound of the cotton 
so ordered to be bought or sold under such contract: Provided, That 
no tax shall be levied under this Act on any such order if the contract 
made in pursuance thereof comply either with the conditions specified 
in the first, second, third, fourth, fifth, and sixth subdivisions of sec- 
tion five, or with all the conditions specified in section ten of this 

Act 

[Secs. 12 to 21, inclusive, provisions for administration, penalties, 
etc.] 

Note. — This act was approved August 18, 19 14. Suits were 
shortly brought to test its validity, and the following year it was 
declared unconstitutional. The basis of this decision, however, was 
technical in character and, upon the reconvening of Congress, a new 
bill, similar in form and intent, was introduced. Concerning the inter- 
pretation of the old act and the changes introduced in this new 
bill Secretary Houston writes as follows: 1 

Section 3 of the United States Cotton Futures Act of August 18, 
1914 (38 Stat., 693), imposes a tax, at the rate of 2 cents for each 
pound of cotton involved, on all contracts of sale of cotton for future 
delivery made at, on, or in any exchange, board of trade, or similar 
institution or place of business. Section 5 prescribes a form of future 
contract which may be made on any exchange, board of trade, or 
similar institution or place of business without liability to the tax 
imposed by section 3. 

Section 1 1 of the act imposes a tax, at the rate of 2 cents for each 
pound of the cotton involved, on each order sent from the United 
States for the making of a contract of sale of cotton grown in the 
United States for future delivery at, on, or in any exchange, board of 
trade, or similar institution or place of business in a foreign country, 
but further provides that the order shall be exempt from such tax if 
the contract made in pursuance thereof comply with the conditions 
specified in the first six subdivisions of section 5. Thus, if any 
foreign exchange adopt a form of contract that complies with the 
conditions specified in the first six subdivisions of section 5 of the act. 
orders for the making of such contracts thereon may be sent from the 
United States without any liability to the tax imposed by the United 
States Cotton Futures Act. 

1 Service and Regulatory Announcements Xo. p. United States Department of 
Agriculture, pp. 98-99. 



510 AGRICULTURAL ECONOMICS 

Up to the present time no foreign exchange has adopted a form 
of future contract for cotton grown in the United States that complies 
with the conditions specified, an important one of which is the recogni- 
tion and use of the Official Cotton Standards of the United States. 
During the latter part of 19 14 representatives of this department 
were sent to Liverpool, Bremen, and Havre to explain the proposed 
Official Cotton Standards of the United States to the exchanges in 
those cities, with the view of securing their adoption as international 
or universal standards. 

H.R. 11861 substantially incorporates the provisions of the 
United States Cotton Futures Act of August 18, 1914, and in addition 
includes two new provisos to section 1 1 and a new section denominated 
•section 11 A. The first of the new provisos to section n provides 
that if the Secretary of Agriculture determines and publicly announces 
that the terms of any future contract made on a foreign exchange are 
the substantial equivalent, and sufficient to accomplish the purposes, 
of the conditions specified in the fourth, fifth, and sixth subdivisions 
of section 5 of the act and the rules and regulations relating thereto, 
such contract shall be deemed to comply with such conditions. The 
obvious effect of this proviso would be to enable foreign exchanges 
to comply more readily with the conditions for exemption from 
taxation. 

It appears that the future contract for American cotton now in 
use by the Liverpool Cotton Association likely is, or could very easily 
be made, the substantial equivalent and sufficient to accomplish the 
purposes of the fourth, fifth, and sixth subdivisions of section 5 of the 
act. It now complies with the first subdivision of section 5. Thus 
in addition, by its recognition and adoption of the Official Cotton 
Standards of the United States (as specified in the second and third 
subdivisions of section 5), the Liverpool contract could be freely 
traded in by persons in the United States without liability to taxation 
under the provisions of H.R. 11861, if enacted. 

The last proviso to section 11 of the bill exempts from taxation 
thereunder all orders sent from the United States for future contracts 
on foreign exchanges, as hedges of spot cotton of American growth 
purchased or sold for shipment, or shipped or consigned, from the 
United States to a foreign country, and for the transfer and liquida- 
tion of such hedges. It is made a condition of the exemption that 
a report of the transaction, including the shipment of the cotton 
involved, be made to the Secretary of the Treasury. Thus farmers, 



MARKET METHODS AND PROBLEMS 511 

spinners, merchants, and all other persons in the United States could 
freely send orders abroad for the making of future contracts in 
cotton on foreign exchanges, as hedges in connection with their actual 
spot transactions, "without any liability to taxation under the act. 
Furthermore, under the bill, if enacted, all orders from the United 
States for the making of future contracts on any foreign exchange, 
including those for purely speculative purposes, would be exempt from 
taxation thereunder if such exchange should adopt the Official Cotton 
Standards of the United States and substantially comply with the 
other conditions specified in the first to the sixth subdivisions of 
section 5. 

Section 1 1 A of the bill is framed so as to tax orders received from 
a foreign country for the making of future contracts on cotton 
exchanges in the United States to the same extent as orders from the 
United States to such foreign country for the making of future con- 
tracts on exchanges therein are taxed under the act, provided the 
exchanges in such foreign country do not comply with the conditions 
specified in section 1 1 for exemption from the tax of orders sent from 
the United States. The object of this provision apparently is to give 
persons in a foreign country no greater privileges of dealing in future 
transactions on cotton exchanges in the United States involving 
American-grown cotton than are afforded to persons in the United 
States of dealing in such transactions on exchanges in the foreign 
country. 

Note. — The act as finally passed (Public Act No. 190, approved 
August 11, 1916) did not include the provisions of section 11A of the 
bill (H.R. 11861) discussed above by the Secretary of Agriculture. 
Nor did it contain section 11 of the old act (see pp. 508-9). Instead, 
section 11 of the new law provides "that the tax imposed by 
section three of this Act shall be paid by the seller of the cotton 
involved . . . . , by means of stamps which shall be affixed to such 

contracts " There was added also a section 6A exempting 

from taxation any contract which provides that if grades other than 
the basis grade specified in the contract shall be tendered, the parties 
to the contract may agree, at the time of the tender, as to the price 
of the grade or grades so tendered, and that if they cannot so agree 
the buyer may demand delivery of cotton of the basis grade at 
the price named in the contract. 

Otherwise the provisions of the old act given above are embodied 
also in the new act. — Editor. 



512 AGRICULTURAL ECONOMICS 

162. THE OFFICIAL COTTON STANDARDS OF THE UNITED 

STATES 1 

For several years previous to the passage of the United States 
Cotton Futures act, the cotton specialists of the Department of 
Agriculture had conducted extensive investigations and surveys 
throughout the cotton-growing states. These studies resulted in the 
collection of valuable information regarding the varying characteris- 
tics of the cotton produced throughout the cotton belt. In one season 
alone this work involved the collection of over 35,000 samples taken 
systematically at stated intervals from farmers' sales in 70 typical 
markets in nine cotton-growing states. These were assembled in 
Washington, D.C., and were carefully graded and stapled. 

From the samples collected in each state a set of types was made 
showing each grade from middling fair to good ordinary. This col- 
lection illustrated the varying qualities produced in these states. It 
also demonstrated the possibility and feasibility of making a single 
set of standards to represent all these cottons. It was found that a 
box of middling cotton, containing 1 2 types, could include types from 
the Coastal Plains section of the South Atlantic States of a grayish 
white color with small or peppery leaf, types of a creamy color from 
the Piedmont section, pearly white types with larger leaf from the 
Gulf States, and types of a slightly reddish or dingy color from Texas 
or Oklahoma. Thus all parts of the cotton belt could be represented, 
or, in other words, one set of standards could be made representative 
of all these cottons. There had always been disagreement among 
cotton men as to the possibility of classifying the cotton from the 
entire belt by a single set of standards. A large number of dealers 
always had contended that separate standards must be prepared for 
Eastern or Upland, Gulf, and Texas cottons. Experience with the 
permissive standards which the Department of Agriculture had been 
preparing since 1909 under the authority of the annual appropriation 
acts had indicated clearly what modifications were necessary in order 
that a standard should represent more accurately those qualities 
which are produced in an average cotton crop. 

The department also had in its possession copies of the proposed 
International Standards, of the old Liverpool standard, and of local 
standards from various markets in the South. 

This wealth of valuable material had been accumulated in the 
course of the department's study of cotton grading and was available 

1 From Service and Regulatory Announcements No. 6, United States Department 
of Agriculture,^. 2-3. 



MARKET METHODS AND PROBLEMS 513 

for immediate use .when the United States Cotton Futures act was 
passed. A study of this material emphasized the fact that there was 
no standard for American cotton which was accepted by, or was 
acceptable to, the cotton trade as a whole. 

Soon after the passage of the act the department secured the 
assistance of several expert cotton classers from the classification 
committees of the New York and New Orleans cotton exchanges, who 
collaborated with the department's specialists in working out the 
actual details of a comprehensive standard. The material in hand 
showed the possibility of a standard which would include all the 
essential qualities of the cotton of the various sections. In order that 
these qualities might always appear in the same proportions and with 
the same arrangement in the practical forms of the standards subse- 
quently made, a definite system of numbering the 12 types in each 
box was devised. A system of recording was instituted by which 
each of the 1 2 types in any box is sure to be made of cotton from the 
same part of the belt and having the same grade characteristics as 
the corresponding type in any other box of the same grade. In this 
way a set of nine grade boxes was prepared, 1 which was believed to 
embody the essential qualities which should appear in a comprehensive 
standard and which would be representative of all white American 
cotton. These nine grades were promulgated on December 15, 19 14, 
by the Secretary of Agriculture as the Official Cotton Standards of the 
United States under the provisions of the United States Cotton 
Futures act. 

B. Auctions and Public Sales 

163. AUCTION SALES OF FRUITS AND VEGETABLES 2 
By VICTOR K. McELHENY, Jr. 

In the early days almost all oranges, lemons, grapes, and pine- 
apples were imported from foreign lands. Large quantities would 
arrive at our eastern ports consigned to various importers; buyers 

1 Middling fair, strict good middling, good middling, strict middling, middling, 
strict low middling, low middling, strict good ordinary, good ordinary. Subse- 
quently, work was undertaken toward establishing official grades for tinged and 
stained cotton. On January 28, 1916, live grades of Yellow Tinged Cotton, three 
of Yellow Stained Cotton, and three of Blue Stained Cotton were promulgated 
by the Secretary of Agriculture. — Editor. 

2 Adapted from a paper read before the Pan-American Scientific Congress. 
Washington, D.C., December 27, 1915, to January 8, 1010. (Copyright by 
American Fruit and Produce Auction Association.) 






514 AGRICULTURAL ECONOMICS 

were divided and had to trade with various importers in various 
quarters. There was no uniformity or stability of price. Similar 
grades would bring widely divergent prices. Some brands would 
sell well; the same quality bearing a different brand would be sacri- 
ficed. Commodities could not be quickly distributed. Distribution 
was not expanding with increasing offerings. Before a cargo was 
cleaned up at private sale, another cargo would arrive. Neither 
shipper nor buyer knew what he was doing. It was not merchandis- 
ing; it was Speculation. Such obstacles restrain trade instead of 
expanding it. For the purpose of overcoming this division of the 
trade, of concentrating sellers and buyers in one place, of giving 
stability and uniformity to prices, and of securing speedy and wide 
distribution the auction method was adopted. 

Today there are sixteen American cities in which are held regu- 
larly public auctions of fruits and in some instances vegetables. 
Eighty-five per cent of Florida oranges and grape fruit; 75 per cent 
of pineapples, oranges, and grape fruit from Porto Rico, Cuba, and 
Isle of Pines; 98 per cent of California oranges, lemons, cherries, 
peaches, apricots, pears, plums, and prunes; 100 per cent of Sicilian 
lemons; 100 per cent of Almeria grapes from Spain; 100 per cent of 
cherries, pears, and prunes from the Pacific Northwest which are sold 
in the large auction cities of the eastern part of the United States, 
are now sold at auction. In addition, the bananas that are consumed 
in New York and Baltimore are sold in that way. In 1914 one hun- 
dred and fifty thousand dollars worth of chestnuts from France, 
Spain, and Italy added to the vast volume of business going. through 
the auction companies of New York. 

The services which the auction renders are ten in number. It 
advertises the sale and prints a catalogue of the offerings. It divides 
the contents of the car or cargo into lots according to the catalogue. 
This "lining-up" enables the buyer to examine the goods quickly and 
make a notation as to its quality and condition on his catalogue as 
an aid to his bidding at the sale. A certain number of packages of 
each " line " are opened for the inspection of buyers. These are called 
"parts of marks" not "samples." The buyer is free to open other 
packages if he so desires. The commodity is sold at public auction 
to the highest bidder by auctioneers who are specialists in the line of 
goods that they sell. At each sale the auction clerk makes a record 
of the number of the lines sold, the price at which the goods are sold, 
the name of the buyer, and the quantity purchased by each buyer. 



MARKET METHODS AND PROBLEMS 515 

This record is open to the inspection of the seller. The auction 
superintends the delivery of the commodity sold to the buyer. 
Within twenty-four hours of the sale the auction sends an "account 
sales", to the seller together with a check for the amount of the 
sale less the commission charged by the auction house. Ninety 
per cent of the auction sales in the large auction markets are on 
credit. The auction house guarantees the seller against loss arising 
from the insolvency of the buyers. The auction house after the 
sale furnishes the seller with an exact copy of the catalogue used 
on the sale with the prices realized opposite each line sold. (See 
catalogue, p. 516.) 

In most of the markets where auctions are established the auction 
house does not accept direct consignments. Auction offerings come 
through the salaried representatives of co-operative associations, the 
salaried agents of shipping concerns which assemble growers' ship- 
ments into carload lots or through private agents of growers, which 
latter are termed " receivers" and who work on a commission basis. 
These receivers usually handle only commodities sold through the 
auction. Other offerings come through "commission men" who sell 
at auction commodities customarily thus sold, while selling their other 
commodities at private sale. 

There are present at the auction sales jobbers, fine fruiterers, 
wholesale grocers, representatives of chain stores, brokers for hotels, 
restaurants, and retail stores, push-cart men, and peddlers. There 
are buyers for all grades of fruit from the very finest to the most 
inferior. There are buyers for fruit in prime condition and buyers 
for ripe fruit that must go into immediate consumption. There are 
large buyers and small buyers. (See chart, p. 517.) 

The larger the quantity of a commodity the greater the necessity 
for complete publicity on distribution. Auction gives that publicity. 
Auctions are public sales in every sense of the word. The auction 
houses can have no secrets. Any questions that may be asked of 
them by a shipper can be answered and will be answered. 

Not less important than complete publicity is competitive bidding; 
in fact it might be said that the keystone of the auction system is the 
selling of the commodity to the buyer who will bid the most after 
open competitive bidding. The experienced auctioneer knows the 
buyers, knows what buyers are dealing in the same lines of fruit, and 
the inevitable result is that competitive bidding brings to the grower 
results that cannot otherwise be obtained. 



5i6 



AGRICULTURAL ECONOMICS 



No system of selling can handle the vast quantity of goods that 
the auction sells with as few salesmen. The auctioneers are the sales- 
men. They must be efficient. It takes years to make a successful 



DESCRIPTION 



1395 
1396 

1397 
1398 
1399 




Fancy 



1387 


36 


1388 


46 


1389 


54 


1390 


64 


1391 


80 


1392 


96 


1393 


112 


1394 


126 




Fancy 
46 

34-46-1 100-1 



Brights 
46-2 

64-17 

100-7 



54-7 

80-2 

126-1 



P ( FRUIT E "HANG E i l 
wns ■ amw U 

SS. BRAZOS 

FANCY 
POETO RICO GRAPE FRUIT 



2 BOXES 
1 1 

72 
90 
91 
29 

4 
19 



2 
2 

9 
19 

8 



$4 00 
5 87V 2 
5 00 
5 00 
5 00 
4 50 
3 62y 2 
3 25 



3 37y 2 

2 50 

3 37y 2 
3 75 

3 12y 2 



auctioneer in these lines. The auctioneer must know and be a 
specialist in the fruit or produce business. His duties require him 
just previous to the sale to examine the commodity that he is to sell 
as to quality and condition and make a notation on his catalogue so 



MARKET METHODS AND PROBLEMS 



517 



he can secure the highest price for the. different grades of fruit. He 
also must know the quality and condition of the commodity sold by 




POSITION OF AUCTION IN CHANNEL OF DISTRIBUTION 

his competitor. The auctioneer pays a license fee and is under bond 
to the municipality. 



518 AGRICULTURAL ECONOMICS 

There are few points connected with the marketing of fruit and 
produce that equal in importance the matter of expense. It is there- 
fore well to remember that the auction system of selling enables the 
grower to get prompt returns from the auction companies at a lower 
selling expense than by any other system. 

The auction can relieve a glutted market as no other medium can. 
Just as soon as the market sags, the representatives of the peddlers 
and the push-cart men at the auction buy heavily. With all the push- 
carts and peddlers' wagons featuring a commodity, many not handling 
anything else for the time being, vast quantities of fruit can be dis- 
posed of in case of a glut. The result is that consumption is greatly 
increased. The glut relieved, prices rebound and the market becomes 
normal. 

The public sales system has a particular advantage over private 
selling in that, the glut having been relieved, the stimulated rate, of 
consumption sends prices upward at once. It is quickly apparent 
that a number of buyers want a certain kind of fruit. No buyer can 
hide the fact. He must bid briskly and bid high if he is to get the 
fruit that his customers want. 

There are too many racial differences and too many varying 
interests involved to enable the buyers to form a combine in the 
auction market. There are Greeks, Hebrews, Irishmen, Germans, 
Italians, and Americans, both large and small buyers, at every public 
sale. The auction companies have made combinations impossible by 
forbidding one buyer to bid for any other who is present at the sales. 
Buyers who cannot be present at a sale are represented by brokers 
whose business it is to buy at auction sales. 

The volume of certain lines of the fruit and vegetable industry has 
grown to such proportions that it has become absolutely necessary for 
the grower to adopt the auction system of selling. There is a point 
at which the system of private selling breaks down simply because the 
machinery of the system is not adequate. That point is reached 
where the distribution has not sufficiently kept up with the production. 
When the production of a particular commodity is large, in order to 
secure the best results for the grower, there must be a concentration 
at one place of both the commodity and the buyer, a minimum number 
of movements, minimum expense, and speed in delivery. When there 
is such concentration and the commodity is standardized, there is no 
question but that the auction system is the most efficient method of 
disposing of the product. 



MARKET METHODS AND PROBLEMS 519 

164. MARKETING AT THE STOCKYARDS 1 
By K. F. WARNER 

To whichever market live stock is consigned, the marketing sys- 
tem that handles them upon arrival is practically the same. There 
is a stockyards company at each market which is an independent 
organization, and which provides pens and other facilities near the 
packing houses where animals are received and cared for until sold. 
While under different managements and ownerships, the yards of one 
market are almost identical with those of another and practically the 
same system of selling is followed in all of them. 

Although a packer may control the stockyards company through 
stock ownership, as at South St. Paul, it should be emphasized again 
that the latter is always a separate company with its own organization 
and officials. It owns the pens, yards, and equipment of the yards 
proper ; it receives and reships the stock ; provides a supply of feed and 
water ; and weighs all animals for both buyer and seller. The commis- 
sion firms are composed of men whose business it is to sell or buy for 
their patrons; they act principally as experienced salesmen, whose 
training and experience make them better able to transact business 
in the yards than the strangers who ship in the stock. 

A load of cattle arrives on the Monday market, which is usually 
the strongest and largest. When hauled to the unloading platform, 
the stockyards company receives, unloads, counts, and yards it in the 
pens assigned to the consignees. Stock is not consigned to individuals 
but to commission firms operating in the yards. The pens are owned 
by the company and allotted to the commission firms, but rent is 
charged to the shipper as a per head yardage fee. Upon receiving the 
load, the commission man sorts it to the best advantage for selling, 
and supervises the feeding and watering until sold. 

All animals that pass through the stockyards market are sold 
according to the classes and grades to which they belong. The classi- 
fication is based on the use to which the animals will be put, this being 
determined chiefly by their sex, age, weight, form, quality, and con- 
dition. The grades within the classes run from prime and choice to 
inferior, and represent the different degrees of excellence in quality con- 
dition or fleshings, and form. The classifications are comparatively 

Adapted from "The Marketing of Live-Stock Products in Minnesota." 
University of Minnesota Studies in the Social Sciences, No. 4, pp. 17-21. (Copy- 
right by the University of Minnesota.) 



520 AGRICULTURAL ECONOMICS 

uniform at the various live-stock markets and similar grades with 
some local variations are used as the basis of published quotations 
at leading market centers. 

Cattle are divided into seven general classes, the first five of which 
consist of animals which are ready for slaughter. The first one is 
called "beef cattle" and includes only steers that are fattened, and may 
be sold as carcass "beef." "Butcher stock" consists of the inferior 
steers and all the cows and heifers except the very poorest. These 
latter are called "cutters," "strippers," and "canners," and are the 
old, thin animals which are fit for little but boneless cuts, canned and 
cured meats, and sausage. The fourth class, which is made up of 
"bulls," is used mainly for sausage, though the younger and better 
ones are often sold as dressed beef or beef cuts, in which case they are 
classed as butcher stock. Calves constitute the fifth division. The 
last two classes are called "stockers" and "feeders" and include thin 
cattle, both male and female, which are sold to feeders for further 
fattening. The "stockers" are younger and generally weigh under 
seven hundred pounds, while the "feeders" are older and heavier. 

Prices paid and quoted on these classes are based chiefly upon the 
killing value of the animal. Thus, "canners" sell below "beef 
cattle" because they will dress out a small proportion of valuable 
meat; and stockers are worth less than feeders because they require 
more time and feed to put them in condition for slaughter. Sheep 
and swine are graded upon the same general principles as cattle, 
although, in the case of hogs, at least, with less detail. 

The buyers consist of five classes: the local packer who is buying 
for immediate slaughter; the buyer of a packing company who has 
no plant at that particular market; "order buyers," or those who are 
buying on orders from outside parties; the speculator or "scalper" 
who picks up bargains to resell; and, lastly, the stockman who comes 
to buy feeders. The buyers of the local packers and the feeder- 
buyers are the ones that really constitute the backbone of a market. 
The representatives of the outside packer, the order buyers, and the 
scalpers are the ones who prevent violent fluctuations in prices and 
who tend to establish and hold the normal spread between different 
markets. If South St. Paul values decline more than those of Chicago, 
some scalper or packer's representative bids in to hold until prices 
rise or for shipment east, and these purchases strengthen the market. 
Thus, though Swift & Company have the only large plant in South 
St. Paul, they must bid in competition with other buyers who pur- 



MARKET METHODS AND PROBLEMS 521 

chase for shipment to other markets. In Chicago one other class of 
order buyers makes a strong demand for good, heavy cattle. Ortho- 
dox Jews are not supposed to eat beef that has been killed over three 
days, and as a result many "Kosher" cattle, as they are called, are 
bought for shipment to New York on foot, this demand tending to 
keep up the price. 

With these possible purchasers before him, the commission man 
plans how best to sort the cattle, and dickers with prospective cus- 
tomers, holding out for as much as he thinks he can get. Finally, a 
buyer rides into the pen and looks the stock over. "I'll give $7 . 90" 
(per hundredweight). " They're worth $8.15 today," the commission 
man replies. The buyer shakes his head and starts to leave. "Eight 
even," he calls back. "Eight and a nickel," the commission man 
concedes. "Weigh 'em," from the buyer, and the deal is over. No 
binding memorandum is made of the trade until night, when each sale 
is registered, together with price, name of firms, and weights. After 
the deal is closed, the cattle are run over the scales and weighed by 
the stockyards company. By means of a patent device, a cardboard 
slip is inserted in the scale and into it is impressed the weight of the 
load. Such recorded weights are accurate and official. 

With weight and selling price at hand, the commission firm makes 
out the check due the shipper on his load. Although the packers pay 
cash to the commission firms, the latter often mail checks to country 
shippers before they actually receive their pay from the packers. 
Fixed charges are assessed against each head of stock sold in the yards 
and consist of a commission, a fee for yardage, and one for feed. 
These, together with freight, terminal charge, insurance, and inspec- 
tion in case of hogs, are deducted by the commission men from the 
selling price of the stock before the check is remitted to the shipper, or 
deposited to the shipper's account, as the case may be. 

Yardage fees are 25 cents per steer, or nearly 2 . 5 cents per hun- 
dred; hogs, 8 cents per head, or 3.5 cents per hundred; and sheep, 
5 cents per head or about 6 cents per hundred. Feed costs from 
2 to 3 cents per hundred pounds live weight. Commission fees for 
selling are $10.00 per 22,000 pound car of cattle, or 4.5 cents per 
hundred; hogs, $8 . 00 per 17,000 pound car, or 4 . 7 cents per hundred ; 
and sheep, $8.00 per 12,000 pound car, or 6.7 cents per hundred. 

Many loads come in and are sold by the firms to which they are 
consigned without the owner's being in or near the yards. Also many 
orders for feeders are filled by the commission men without the buyer's 



522 AGRICULTURAL ECONOMICS 

ever seeing the animals until unloaded on arrival. Considering, also, 
that the checks are made out and the charges deducted by the com- 
mission men themselves, it would appear that there is a good oppor- 
tunity for fraud. In the first place, however, a firm will not get trade 
unless it has a good reputation, and since there is keen competition 
for shipments among commission men, there is every inducement to 
be square and to show as good results as possible. Second, the firms 
are combined into an exchange with fixed rules to govern trading, and 
these rules are strictly enforced. Any man can get a chance to do 
business in the yards, but unless his reputation is good he will not be 
admitted to the exchange, and the buyers can readily regulate their 
bids so as to prevent him from getting any business. To safeguard 
the shipper further, a $20,000 bond is given by each firm to the 
exchange. With all these precautions, with the keen competition 
between firms, and with the speculators ready to steady the market, 
the shipper can be sure that these experienced men are able to procure 
more for his stock than he can get himself. Moreover, those who 
deal often in the yards consider the commission men as their friends 
and advisers, and in many instances the commission men advance 
money to them for buying feeders. 

165. SELLING CHEESE ON THE DAIRY BOARD 1 
By H. C. TAYLOR 2 

Eight dairy boards were in operation in Wisconsin in 191 2. They 
were located at Plymouth, Sheboygan, Appleton, Seymour, Lone 
Rock, Muscoda, Highland, and Mineral Point. The movement began 
in 1873, and by 1890 there were eighteen such boards in operation. 
There was some falling off in the years following, but in 1898 a return 
to the same high figure. In the next year it dropped to thirteen, 
which was the average of the succeeding decade, but since 1908 there 
has been still further decline. 

The board meeting is usually held in a room temporarily set apart 
for that purpose in a hotel or some other building, where a blackboard 
is provided and where there is room for the sellers and buyers to sit 
in front of the blackboard. Offerings of cheese are posted on this 

1 Adapted from Bulletin 231, Wisconsin Agricultural Experiment Station, 
pp. 10-14. 

2 W. A. Schoenfeld and G. S. Wehrwein, joint authors. 



MARKET METHODS AND PROBLEMS 523 

blackboard and bids are also written down as they are received. 
This "call board" is intended to bring open competition on the cheese 
market, and its use became general between 1896 and 1900. Unfor- 
tunately, less than 10 per cent of the cheese is sold on the boards, and 
that is in a large measure bid off by the men who have contracts for 
much larger quantities of cheese which they are to receive at board 
prices. It is commonly believed that the dealer who knows that 
every § of a cent he bids up on the cheese on the board will increase 
the price on all his contracted cheese by the same amount lacks the 
courage which a true competitive bidder should show. It has been 
alleged that the dealers sometimes get together before the board 
meetings and have an understanding as to what bids are to be made 
and as to who shall have the cheese. In answer to this allegation the 
dealers say that the independent brokers who have to depend upon 
the board as a place to buy their cheese will often bid up the price 
so that no such combination could be effective in controlling the price. 
Investigation tends to confirm the belief that at times the board is 
under the control of the dealers and again at other times the bidding 
becomes highly competitive. 

The great bulk of cheese is sold on the basis of board prices with- 
out being offered on the board. This is less trouble to the salesman 
but destroys, in a great measure, the value of the "call board" as an 
open market. There is evidence to show that the dishonest practice 
of paying the salesman a tip has been indulged in for the purpose of 
keeping him off the board. If all the sales were made in the open 
market provided by properly regulated call boards, much of the 
occasion for suspicion of dishonesty would be removed. 

During the summer of 191 2 there developed in Sheboygan County 
a widespread dissatisfaction against the prevailing methods of selling 
cheese. It was charged that prices on the Plymouth Cheese Board 
were not really competitive but arbitrarily fixed beforehand and that 
there was a mere pretense of competition while the board was in ses- 
sion. Accordingly the Sheboygan County Cheese-Producers' Federa- 
tion was formed to undertake the selling of the members' product inde- 
pendently of the Plymouth board. This selling organization embraced 
48 factories, with a joint output of six to eight million pounds — about 
half the product of the county. There were difficulties at the start, 
but within two months the federation was selling a million pounds 
of cheese a month at somewhat above Plymouth board figures. 



524 AGRICULTURAL ECONOMICS 

Furthermore, it is the belief of the farmers concerned in this move- 
ment that the board price has been somewhat higher during 19 14 on 
account of the activities of the federation. 1 

C. Private Dealers and the Middleman Question 

166. VARIOUS TYPES OF WHOLESALE TRADERS 2 
By J. H. COLLINS* 

In this discussion rather arbitrary lines are laid down as boundaries 
for the activities of various types of middlemen, yet in actual practice 
these activities so overlap and encroach upon each other that resulting 
market practices are exceedingly complicated. One man or one firm 
may combine the functions of several middlemen. Many distributors 
act simultaneously as car-lot wholesalers, commission men, and jobbers. 
As a matter of fact, few firms confine their activities to one line of 
business. Thus, of the goods sold by a firm on one day, part may have 
been purchased outright in car lots, part purchased in small lots from 
other receivers, and part consigned on commission. While one firm 
may act in the triple capacity of car-lot wholesaler, commission man, 
and jobber, the three lines of business thus carried on at the same 
time are very distinct and for purposes of discussion may be con- 
sidered as being performed by three separate firms. 

We will begin with the broker who handles car lots only, as a rule, 
and who draws his business from co-operative associations, country 
speculators, large operators, private exchanges, and in some cases 
private shippers. According to strict interpretation, the term 
" broker" can be applied only to those middlemen who act as inter- 
mediaries between the principals in contemplated transactions and 
have nothing further to do with the contract itself. The broker 
normally does not have possession of the articles he deals in, but must 
carry on all business in the name of his principal. Commodities 
handled by brokers, as a rule, are sold to car-lot wholesalers or jobbers. 

At the beginning of each business day the broker looks over his 
business, ascertains conditions on other markets, and takes note of 
the number of cars he has on hand, number en route, etc. With all 

1 This paragraph is from a later bulletin (No. 251) by B. H. Hibbard and 
Asher Hobson, pp. 24-26. 

2 Adapted from "Methods of Wholesale Distribution of Fruits and Vegetables 
on Large Markets," Bulletin 267, United States Department of Agriculture, pp. 10-22. 

3 J. W. Fisher, Jr., and Wells A. Sherman, collaborators. 



MARKET METHODS AND PROBLEMS 525 

this well in mind, he is ready to approach the wholesale trade. His 
next step is to make a careful canvass of the wholesale district, visiting 
or calling up by telephone all those who may be interested in what 
he has to offer. When a possible customer is found, the next step, 
in case the car or cars have arrived, is to allow the prospective buyer 
to inspect the contents. After inspection, satisfactory terms are 
arranged and then before the sale can be consummated it is necessary 
that the shipper confirm the broker's action. Assuming that the 
broker is selling a car of apples, Ganos and Grimes for instance, he 
may telegraph the shipper, as follows: 

Jones offers on car MC sixteen eight fifty-four, two fifty Ganos, two 
seventy- five Grimes, delivered. 

In case this offer is satisfactory, the shipper's reply may read: 
Confirm car MC sixteen eight fifty- four Jones two fifty Ganos, two 
seventy-five Grimes, delivered. 

Or in case the price is unsatisfactory, the shipper might refuse as 
follows : 

Jones too low; car MC sixteen eight fifty-four; must have three 
Grimes. 

Collection is often made through a bank located at destination. 
The shipper sends the bill of lading with draft attached, to a bank, at 
the time the car is shipped, and after inspection the purchaser pays 
the draft and secures the bill of lading. 

Sometimes the broker does not make a direct sale, but handles the 
goods through auction. His activities are then confined to seeing that 
the goods arrive at the auction and attending the sale to withdraw the 
shipment if prices are unsatisfactory. 

The broker handles business in large volume at perhaps less cost 
to himself than any other type of middleman. He has but little 
capital in his business and his heaviest items of expense are usually 
rent, clerical help, and telegraph charges. As a rule, most of the 
broker's business is composed of the accounts of associations and large 
private shippers. The broker acts as the exclusive agent on his 
market for each concern that he represents, and since he handles car 
lots only and moves large quantities in relatively short periods of time, 
he is enabled to render important services at a very low cost to the 
shipper. 

A very important factor in market distribution is the car-lot 
wholesaler. These men purchase fruits and vegetables from 



526 AGRICULTURAL ECONOMICS 

co-operative associations, country merchants, car-lot assemblers, 
traveling buyers, buying brokers, individual growers, speculators, 
and city brokers. They distribute goods to the jobbing and retail 
trade or to the country trade. Thus it will be seen that their 
activities cover a wider field than do those of almost any other type 
of distributor. 

Most of the city sales are for cash or for only one or two weeks' 
time, but country customers are often allowed thirty to sixty days in 
which to settle. As a rule, these sales to the country trade are the 
most uniformly profitable of any to the car-lot wholesaler. Prices 
charged are usually slightly higher than can be secured from resident 
buyers on the market. This, of course, is justified, as extra packing 
and cartage charges are involved. The country trade, as a rule, 
makes little attempt to keep in close touch with market prices, but 
prefers to place orders regularly with selected wholesalers or jobbers 
and depend upon receiving fair treatment. Some wholesalers do not 
rely simply on such orders as they may receive by mail or telegraph 
from country customers, but seek to develop their trade through 
private traveling salesmen. 

Many car-lot wholesalers buy when prices are cheap and put the 
produce in storage, distributing later when prices admit of a fair 
profit. This involves a certain element of risk as a market may not 
take on a better tone in time for the wholesaler to move his stored 
goods to advantage. Profits to the car-lot wholesaler vary greatly. 
Since he deals very largely in perishables in large quantities and on 
his own account, his aim is to make as much profit as possible on each 
sale. He has better chances to make wide margins than has the 
jobber, because in many instances he deals directly with the farmer, 
who is an inexperienced seller and unfamiliar with market methods. 
However, the car-lot wholesaler buys in large quantities for future 
sale and thus takes greater risks than the jobber, who buys in small 
quantities from day to day, moves goods rapidly, and in cases of sharp 
market declines is able to close out very quickly. Average net 
profits at this stage of distribution are usually less than is popularly 
supposed. Business competition is usually very keen and prevents 
any long-continued, excessive margin or profit. Considering his cost 
of doing business and the services which he renders, the car- lot whole- 
saler probably operates on as small a margin of profit as any middle- 
man concerned in food distribution. 



MARKET METHODS AND PROBLEMS 527 

These men perform the absolutely essential functions of acting as 
primary distributors of produce arriving at market in car lots. Any 
reforms which may be accomplished in distributive methods must take 
into consideration the fact that some definite agency must undertake 
the work of breaking car lots and starting distribution at market 
centers. 

The commission merchant is a special agent whose business is the 
selling of goods on commission. He has possession of the commodities, 
and all transactions are in his own name. He may dictate terms and 
methods of sale, but must obey instructions if given, and he is respon- 
sible to the shipper only for a proper accounting in the final terms. 

Commission men solicit shipments from growers, car-lot assem- 
blers, and co-operative associations. It should be stated, however, 
that co-operative associations do not favor the promiscuous consign- 
ment of their products and seek to eliminate this method as far as 
possible. Commission merchants handle goods for 5 to 10 per cent 
of the gross selling price. In many cases, however, the dealer, by 
sharp practices, increases his margin to 15 per cent or over. As soon 
as the shipment is "closed out" the commission man deducts freight 
and other expenses and his charges and remits the balance to the 
shipper, together with an "account sales." 

One charge made against dealers of this type is that they some- 
times remit more than the market price to a new shipper in order to 
get future business. As this does not give the shipper a fair idea of 
the market and does give him a false impression of the dealer's ability 
as a salesman, it is a practice which should be regarded with great 
disfavor by all interests in the market. Another malpractice some- 
times attributed to commission merchants is selling for more than the 
market price and remitting to the shipper on the basis of the market 
price. Many have regarded this practice as legitimate, because the 
increased selling price is not due to the superior quality of the goods 
sold but to the dealer's excellent salesmanship. These practices cer- 
tainly are not common to most commission men and are not universal, 
as is generally supposed. Much that the shipper considers dishonest 
can be explained, his suspicions being due to misunderstanding, or 
the trouble may be traceable to the shipper himself. 

It is not because commission men as a class have proven to be 
dishonest, but the very fact that the commission man has great oppor- 
tunities for dishonesty, if he chooses to avail himself of them, has 



528 AGRICULTURAL ECONOMICS 

caused shippers to condemn unhesitatingly any practices which did 
not appear to be perfectly plain. A shipper is seldom able to inspect 
his own output with an unprejudiced eye; his own product usually 
appears better to him than does his neighbor's offering. Often, there- 
fore, the shipper who considers his goods on a par with the best 
market offerings is disappointed when returns are below the figures 
listed on current wholesale quotations, and accuses the dealer of dis- 
honesty. Often, too, perishables which leave the point of origin in 
first-class shape arrive at destination in a greatly deteriorated condi- 
tion. The grower, who last saw his produce in first-class marketable 
condition, does not understand or appreciate the conditions which 
were responsible for his loss. 

Commission men offer almost the only good outlet for unstand- 
ardized goods which cannot be sold direct to the wholesale trade. 
Acting as primary receiver of less than car-lot shipments, they serve 
as a medium through which to market all goods which cannot be 
sold direct to car-lot wholesalers, and, when honest and efficient, they 
offer to inexperienced shippers the valuable services of trained experts 
in disposing of their produce. 

Next in importance to car-lot wholesalers on large markets is the 
jobbing trade. Jobbers are middlemen at distributing centers who 
usually buy in less-than-car-lot quantities from car-lot wholesalers or 
commission men and in turn sell to the retail trade; in other words 
they are intermediaries between primary receivers and retailers. The 
term as here used must be distinguished from the term "jobber" as 
used in connection with wholesale distribution for manufacturing con- 
cerns, where the jobber distributes the total output of several fac- 
tories direct to large wholesale houses. 

Jobbers in fruits and vegetables get their supplies from com- 
mission merchants, car-lot wholesalers, auctions, and public markets. 
The chief outlet for the jobber is the retailer. The jobber, acting 
as the intermediary between the car-lot wholesaler and the retailer, 
buys in less than car lots, as a rule, makes quick sales, operates on a 
relatively small margin, and secures his profits by rapidly turning, 
over his capital. 

The jobber's chief usefulness at the present time is in facilitating 
the rapid distribution of extremely perishable products. A car of 
strawberries, for instance, will usually be disposed of much more 
rapidly when handled by several jobbers than would be the case if 
a single car-lot wholesaler attempted to complete the distribution to 



MARKET METHODS AND PROBLEMS. 



529 



the retail trade. With the growth of standardization, better grading 
and packing, together with greater efficiency in the business of car- 
lot receivers, it is possible that many of the present functions of the 
jobber may be assumed by the car-lot wholesaler. This applies to 




Fig. i. — Main channels of distribution for fruits and vegetables. 



our smaller markets especially. On the great terminal markets, how- 
ever, the jobbers must remain important factors for some time to 
come. In these cities they sell to the vast number of those retailers 
who buy in small quantities and who cannot take time or trouble to 
go to primary markets and select their goods. 



530 AGRICULTURAL ECONOMICS 

If the entire retail trade were to attempt to get in direct touch 
with car-lot wholesalers on our large markets, the congestion of busi- 
ness would be so great as to block most seriously the economical 
movement of perishable food products. 

Perhaps a graphic representation of the more common steps in 
distribution will serve to make this subject more clear. In Fig. i the 
interlocking circles are intended to show the intimate relation between 
certain of the agencies interested in distribution. Thus the grower 
may operate individually or he may combine with his neighbors. One 
firm often performs the function of the car-lot wholesaler, commission 
merchant, and jobber, and the business details overlap in such a way 
that it is difficult to dissociate the three lines of business. Perishables 
do not and cannot pass through the hands of all the distributing 
agencies which are indicated. As a matter of fact, usually only a 
few agencies are instrumental in handling the contents of any given 
car. The contents of two cars coming to a large market on the same 
day may pass into consumption through very different channels. 
Thus one car may be consigned to a commission merchant, who 
divides the car among a large number of jobbers and retailers, while 
the other car may be purchased by a buyer for a car-lot wholesaler 
who sells to the jobbing and retail trade. 

There are usually very definite reasons why goods coming to mar- 
ket pass on to consumption through such diverse channels. Among 
those factors which decide along what course and through what hands 
perishables shall pass in going from producer to consumer are: (i) the 
condition or tone of the market; (2) grade, pack, and quality of the 
shipment; (3) district in which the shipment originates; and (4) the 
shipper's knowledge of market conditions. 

167. THE RETAILER'S PART 1 
By G. HAROLD POWELL 

Taking the 30 representative citrus fruit markets, including 
5,485 reports extending over the year 19 14, the distribution of 
the consumer's dollar is as follows: 36.5 per cent of the consumer's 
dollar is returned to the grower in California, of which 9 . 8 per cent 
represents the proportion allotted to picking, hauling, and packing; 

1 Adapted from an address delivered at the Eleventh Annual Meeting of the 
Western Fruit Jobbers' Association and printed in the Western Fruit Jobber, 
April, 19 is, pp. 23-31. 



MARKET METHODS AND PROBLEMS 



531 



20.5 per cent represents the allotment to transportation; 1.5 per 
cent the grower's cost of selling the jobber, and 41 . 5 per cent the 
proportion represented by the jobbing and retail gross distributing 
costs, the latter representing four times as much as the former. 



Consumer's 



Dollar 




This investigation brings out clearly that the most important 
factor in the cost of distribution, next to the cost of transportation, 
is the retail distribution, which represents one-third of the consumer's 
dollar. The amount of the consumer's dollar represented by the 
gross retail cost is four times the amount represented by the jobber's 
cost. It is more than the proportion absorbed by the cost of trans- 
portation and the jobber's cost combined. It is nearly equal to the 
amount returned for the fruit on the tree, which includes the cost of 



532 AGRICULTURAL ECONOMICS 

production and the grower's profit, and the cost of picking, hauling, 
and packing. 

There are several classes of retailers engaged in the fruit business; 
the fancy fruit store, the high-class grocery store, the average grocery 
store, the chain store, the fruit stand, and the fruit vender. The 
present retail system is largely the result of the demands of the con- 
sumers which each class serves. A retailer's overhead charge includes 
store rents, salaries and wages of employees, interest on capital, cost 
of purchasing, re-sorting, displaying, storage, and delivering goods, 
taking of orders, telephone, light, heat, and other store expenses, 
losses from decay and deterioration, taxes, insurance, and other 
necessary expenses. Most of the expenses are also included in the 
jobber's overhead costs. Where the fruit is sold from pushcarts and 
street stands, some of the expenses are eliminated or are reduced. In 
the fancy fruit stores and in the large grocery stores which cater to the 
well-to-do, these overhead charges are naturally larger. They make 
up the cost of the service which the consumer demands, and the cost 
of the fruit is only one of the factors in the consumer's price. The 
simpler the service, the less the overhead cost, and, in those cases, 
the consumer pays primarily for the fruit with only a comparatively 
small overhead charge added for service and profit. 

The retail distributing business is a vital link in the chain between 
the producer and the consumer. The desire for fruit is awakened by 
suggestion, by seeing attractive displays of fresh, luscious fruit in the 
windows of the store, on the counters, or in other forms of display. 
It is stimulated by the attractive fruit stands and by the pushcarts 
laden with golden oranges, by advertising in the magazines, the news- 
papers, street cars, and other advertising mediums. It is promoted by 
prices which bring the fruit within the reach of the average consumer. 
The retail dealer, more than any other factor, creates this appetite 
appeal, because he comes in direct contact with the consumer, and he 
stimulates or retards it by charging reasonable or exorbitant prices. 

The retail dealer must therefore know how to make artistic fruit 
displays if he is to catch and sustain the interest of the consumer. 
The fruit must always be fresh in appearance, free from decay and 
appetizing in every way, and the price must be reasonable. If the 
appeal to the consumer's appetite is not strong and continuous, the 
retailer does not increase the consumption. If the price is not reason- 
able, it cannot be purchased by the average consumer. If the sales 
are not rapid, the fruit wilts, loses color, decays, and is a drag on the 



MARKET METHODS AND PROBLEMS 533 

hands of the retailer. Under these conditions the retailer, unless he 
is a fruit specialist, does nothing to encourage sales. The unattractive 
fruit is destroying the desire on the part of the consumer, the losses 
from bad condition are excessive, and the retailer must add a margin 
large enough to cover these losses and risks. Attractive displays and 
quick sales, at a reasonable margin of profit on each transaction, 
increase the per capita consumption and make a satisfactory profit 
for the dealer at the end of the year. Any other system jeopardizes 
the interest of the producer, reduces the volume of business of the 
jobber, and keeps the net profit of the retailer below what it otherwsie 
might have been. 

The retail fruit business needs the same careful investigation as 
that suggested for the fruit jobber, with a view to improving the 
entire retail business system, to developing better methods of creating 
an increased consumption, and of putting the entire retail system on 
a basis which will make it the most vital factor in handling the rapidly 
increasing fruit crop. To accomplish this end, the average retail fruit 
dealer needs the co-operation of the producer and the jobber. The 
consumer demands a service that imposes a heavy overhead charge 
on the retailer's operations — a condition which the producer does not 
usually appreciate. 

Whether the jobbing and retail fruit business is organized along 
economical and efficient lines, whether the purchasing, the deliveries, 
the credits, and other features of the business are handled with the 
fewest number of steps and with a minimum of economic waste, and 
whether the handling of the business by the producer, jobber, and 
retailer serves the best interest of the consumer, the author is not 
prepared to say. It is recognized that both the wholesale and retail 
systems are products of modern industrial and social life and that 
changes in the system must progress slowly. The facts outlined in 
this discussion are not presented in a spirit of criticism, but in the 
hope that they may lead to investigation and to a clearer understand- 
ing of the different phases of distribution, that they may induce the 
jobbing and retail fruit interests, the railroads, and the producer to 
study his own problem more carefully, and to study problems of every 
other factor as well, to the end that the fruit-distributing system from 
the producer to the consumer may be made more stable, more direct. 
more efficient, with every wasteful step and process eliminated, and 
all handled to gain the confidence of the consumer and to serve his 
best interests. 



534 AGRICULTURAL ECONOMICS 

168. "SWAT THE MIDDLEMAN" 1 

Owing largely to the unorganized state of the producer and the 
consumer and the lack of adequate marketing facilities, there have 
grown up in cities classes of men who have taken upon themselves 
the burden of food distribution. There are at present altogether too 
many men and too much machinery involved to conduct this dis- 
tribution economically. This is most marked in the elimination of 
the more expensive middlemen in certain classes of agricultural 
products. 2 In the handling of such commodities as fruits, vegetables, 
and similar articles of a perishable nature, the disposition to discard 
the more expensive methods of distribution has been very feeble. 

The attitude of the producer toward commission men is one of 
suspicion. Where the producer does not openly charge dishonesty, 
he greatly doubts their business efficiency. It is difficult to see how 
the commission man can be eliminated unless a representative of the 
producer, or the railway, or the consumer takes his place. It should 
be said that the frequent criticism of commission men does not belong 
to all of them. They are made necessary by a very burdensome 
system of distribution and it is the greed or dishonesty of some of 
them that gives occasion for the criticism of the whole body of com- 
mission men. 

Owing to the dissatisfaction felt by the producer toward the com- 
mission man, and definite economic reasons, the commission man is 
being slowly supplanted by the jobber. The jobber is interested in 
buying for cash for as little as he can and selling for all that he can 
obtain. During a period of uniform or rising prices he buys outright, 
whereas during conditions of oversupply, leading to fall in prices, he 
accepts shipments only on a commission basis in order to minimize 
his risks. 

In order to obviate the danger of control of the supply by middle- 
men, means should be found and facilities afforded for a direct method 
of shipment from the producer to the consumer. The Massachusetts 
Commission on the Cost of Living aptly says: "A long line of com- 
mission men, produce merchants, jobbers, hucksters, retailers and 
what not simply passing goods from hand to hand like a bucket 
brigade at a fire, is not only inefficient and wasteful, but very costly. 
In these days a hydrant and a line of hose are wanted." 

1 Adapted from Preliminary Report of the Chicago Municipal Markets Com- 
mission, April, 1914, pp. 21-22. 

2 See Report of the Industrial Commission, Vol. VI, pp. 6-7. 






MARKET METHODS AND PROBLEMS 535 

The commission business is moribund and should have been dis- 
carded long ago. It has disappeared in some instances to the satisfac- 
tion of those affected. The consumer pays the cost of uneconomical 
handling of food by the commission merchants, and the elimination 
of unnecessary factors and the obtaining of more direct avenues to a 
source of supply are his sole relief. In order to economize the cost 
of the present distributive system he must merge the various dis- 
cordant elements to secure greater efficiency. 

169. THE SEEN AND THE UNSEEN 1 
By FREDERICK BASTIAT 

There are several modern sects which violently oppose what they 
call intermediates. They would gladly suppress the capitalist, the 
banker, the speculator, the projector, the merchant, and the trader, 
accusing them of interposing between production and consumption, 
to extort from both, without giving either anything in return. Or 
rather, they would transfer to the state the work which they accom- 
plish, for this work cannot be suppressed. 

The sophism of the Socialists on this point consists in showing to 
the public what it pays to the intermediates in exchange for their 
services, and concealing from the public what it would be necessary 
to pay to the state for doing the same thing. Here is the usual con- 
flict between what is before our eyes and what is perceptible to the 
mind only; between what is seen and what is not seen. 

It was at the time of the scarcity in France, in 1847, that the 
French Socialists attempted and succeeded in popularizing their 
erroneous theories. They knew very well that the most absurd 
notions have always a chance with people who are suffering. There- 
fore, by the help of the fine words, "trafficking in men by men, specu- 
lation on hunger, monopoly," they began to deprecate commerce, and 
to cast a doubt over its benefits. "What can be the use," they say, 
"of leaving to the merchants the care of importing food from the 
United States and the Crimea ? Why do not the state, the depart- 
ments, and the towns, organize a service for provisions and a maga- 
zine for stores? They would sell at a return price, and the people, 
poor things, would be exempted from the tribute which they pay to 
free, that is, to egotistical, individual, and lawless commerce." 

The tribute paid by the people to commerce is that which is seen. 
The tribute which the people would pay to the state, or to its agents, 

1 Essays on Political Economy, pp. 100-109. (Gr. P- Putnam's Sons.) 



536 AGRICULTURAL ECONOMICS 

in the Socialist system, is what is not seen. In what does this pre- 
tended tribute which the people pay to commerce consist ? In this : 
that two men render each other a mutual service, in all freedom, and 
under the pressure of competition and reduced prices. 

When the hungry stomach is at Paris, and grain which can satisfy 
it is at Chicago, the suffering cannot cease till the grain is brought 
into contact with the stomach. There are three methods by which 
this contact may be effected : (i) the famished men may go themselves 
and fetch the grain; (2) they may leave this task to those to whose 
trade it belongs; (3) they may club together and give the office in 
charge to public functionaries. Which of these three methods pos- 
sesses greatest advantages ? In every time, in all countries, and the 
more free, enlightened, and experienced they are, men have volun- 
tarily chosen the second. I confess that this is sufficient, in my 
opinion, to justify this choice. I cannot believe that mankind, as a 
whole, is deceiving itself upon a point which touches its interest so 
closely. But let us now consider the subject. 

For thirty-six millions of citizens to go and fetch the grain they 
want from Chicago is a manifest impossibility. The first method 
then, goes for nothing. The consumers cannot act for themselves. 
They must, of necessity, have recourse to intermediates, officials or 
agents. But observe, at the same time, that the first of these three 
methods would be the most natural. In reality, the hungry man has 
to fetch his grain. It is a task which concerns himself, a service due 
to himself. If another person, on whatever ground, performs this 
service for him, takes the task upon himself, this latter has a claim 
upon him for a compensation. I mean by this to say that interme- 
diates contain in themselves the principle of remuneration. However 
that may be, since we must refer to what the Socialists call a parasite, 
I would ask, which of the two is the most exacting parasite, the mer- 
chant or the official ? 

Commerce (free of course, otherwise I could not reason upon it), 
commerce, I say, is led by its own interests to study the seasons, to 
give daily statements of the state of the crops, to receive information 
from every part of the globe, to foresee wants, to take precautions 
beforehand. It has vessels always ready, correspondents everywhere; 
and it is its immediate interest to buy at the lowest possible price, to 
economize in all the details of its operations, and to attain the greatest 
results by the smallest efforts. It is not the French merchants only 
who are occupied in procuring provisions for France in time of need; 



MARKET METHODS AND PROBLEMS 537 

and if their interest leads them irresistibly to accomplish their task 
at the smallest possible cost, the competition which they create 
amongst each other leads them no less irresistibly to cause the con- 
sumers to partake of the profits of those realized savings. The grain 
arrives : it is to the interest of commerce to sell it as soon as possible, 
so as to avoid risks, to realize its investments and take advantage of 
the first opportunity to buy again. 

It is true, the consumer is obliged to reimburse commerce for the 
expenses of conveyance, freight, store-rooms, commissions, etc., but 
can any system be devised in which he who eats grain is not obliged 
to defray the expenses, whatever they may be, of bringing it within 
his reach? The remuneration for the service performed has to be 
paid also; but as regards its amount, this is reduced to the smallest 
sum by competition. 

But if, according to the Socialist ideas, the state were to stand in 
the place of commerce, what would happen? I should like to be 
informed where the saving would be to the public ? Would it be in 
the price of purchase? Imagine the delegates of forty thousand 
parishes arriving at Chicago on a given day, and on the day of need: 
imagine the effect upon prices. Would the saving be in the expenses ? 
Would fewer vessels be required, fewer sailors, fewer teamsters, fewer 
railways? or would you be exempt from the payment of all these 
things ? The Socialists overlook the fact that society, under a free 
regulation, is a true association, far superior to any of those which 
proceed from their fertile imaginations. 

170. THE ARGUMENT FOR SPECIALIZATION 1 
By L. D. H. WELD 

Much help may be derived from an application of the principle of 
division of labor and specialization to the marketing process. Farm 
products, in passing from farmer to consumer, normally pass through 
the hands of certain middlemen, who may be classed roughly as local 
buyers or country shippers, transportation companies, one or more 
classes of wholesale dealers, and, finally, retailers. The need of the 
local shipping unit, in order to consolidate small contributions of indi- 
vidual farmers into car lots, to furnish storage facilities until time of 
shipment, and to establish trading connections with city dealers, is 

1 Adapted from American Economic Review, V, No, 1, Supplement (March, 

1915), pp. 126-28. 



538 AGRICULTURAL ECONOMICS 

apparent. It is the link or links between country shippers and the 
retail store that many people have in mind when they say that there 
are too many middlemen. 

The need of wholesale produce distributors may best be demon- 
strated by a consideration of the reasons why country shippers do 
not and cannot generally sell their goods direct to city retail stores. 
The reasons are as follows: 

i. To procure the greatest economy in local shipments, the 
quantity sent at one time is too great for most retailers to handle. 
Retailers carry a large variety of products, and storage facilities for 
handling large units of various commodities are out of the question. 
Goods would have to be sent in small allotments, and retailers would 
have to obtain these small allotments from a great variety of sources. 

2. Shipments from local units vary in quantity from shipment to 
shipment and for different times of year. The city supply of many 
commodities comes first from one producing section and then from 
another. The city retailer must be able to buy from day to day in 
order to correlate his supply with his demand. Furthermore, the 
shipments from the country at one period will be insufficient, whereas 
at another period they are much greater than the retailers can absorb. 
This surplus must be carried by a separate class of middlemen from 
the period of surplus production to that of insufficient production. 

3. The quality of commodities sent by a country shipper is very 
variable, whereas each retail store has a fairly definite class of trade 
and must have goods of fairly constant quality. 

4. Business relations between country shippers and retail stores 
are difficult to establish, and once established are difficult to maintain. 

5. Retailers are notoriously "slow pay." Country shippers can- 
not afford to wait for their money, because they must be paying cash 
for goods as they are brought in by the farmer from day to day. This 
fact alone has been responsible for the giving up of innumerable 
attempts to establish direct selling from country shippers to retailers. 

These reasons suggest the functions of wholesale dealers. These 
functions are not generally understood; they are much more difficult 
to perform and require a much greater degree of organization and 
business ability than most people realize. Frequently they will be 
subdivided among two or three different sets of wholesalers, as, for 
example, a commission merchant, handling goods on consignment, and 
a wholesaler or jobber; or a wholesale receiver who buys outright, 
and a jobber who sells to retail stores. 



MARKET METHODS AND PROBLEMS 539 

For example, a large proportion of the butter made in the 800 
creameries of Minnesota is marketed in New York City, passing first 
through the hands of a wholesale receiver, and then through the hands 
of a jobber. The wholesale receiver specializes in the solicitation of 
shipments from country creameries in Minnesota, the financing of 
these creameries by allowing them to draw drafts on day of shipment, 
the handling and storage of large lots of butter on arrival in New York, 
and the rough sorting out according to quality. These functions 
naturally constitute a business in itself. The jobber performs an 
entirely different set of functions: he buys from the wholesale receiver 
in round lots of say from twenty to fifty tubs at a time; he sends sales- 
men around to innumerable stores in New York to find purchasers; 
he sells one tub at a time, selecting just that quality of butter which 
he knows each retailer, or delicatessen, or restaurant, or hotel, or 
steamship company wants; he delivers the one tub at a time to 
various parts of the city; and he very largely finances the retail 
stores by giving them credit, and undertakes the necessary accounting 
expenses and losses incident to dealing with scores of small retail 
shops. All of the many functions now performed by the receiver 
and the jobber may be performed by one firm — and sometimes they 
are — but it has been found economical to subdivide these various 
steps among two sets of middlemen for a large proportion of the trade, 
each set specializing on one particular class of functions. 

Economists have been fond of praising the minute division of 
labor in the packing plant, the shoe factory, etc., and also the high 
degree of specialization of industrial plants, whereby one makes pig 
iron, another makes steel, another structural forms, etc. Often the 
same men who praise the economies made possible by this u age of 
specialization," when they hear that there are middlemen called local 
buyers, commission men, brokers, jobbers, etc., hold up their hands 
in holy horror and exclaim that there are too many middlemen. 
Possibly there are in some cases, and yet in still other cases the cost 
of marketing might be reduced by adding more middlemen. For 
instance, it would be cheaper for jobbers who buy butter from whole- 
sale receivers and cut it up into one-pound prints, to have their cutting 
done for them by other firms who could keep their machinery and 
skilled labor constantly employed in cutting prints. These same 
jobbers could also save on delivery expense by turning this function 
over to a centralized or co-operative delivery system, which would 
eliminate the vast duplication of delivery equipment and constant 



540 AGRICULTURAL ECONOMICS 

covering and re-covering of the same ground by a hundred different 
firms. There appears to be no reason why this specialization argu- 
ment should not apply to the creation of time, place, and possession 
utilities in the marketing process, as well as to the creation of form 
utilities. 

D. Methods of Direct Selling 

171. PARCEL POST MARKETING 1 
By LEWIS B. FLOHR and C. T. MORE 

Parcel post as a means of transportation has been found by com- 
mercial houses to be useful and efficient. There is no reason why 
farmers cannot make extensive use of it under certain conditions if 
they will. It has been found that one of the chief factors in pre- 
venting the satisfactory development of parcel post marketing has 
been the price asked by some farmers for produce. To illustrate: 
One farmer's wife was receiving 20 cents a pound for butter in her 
local market, a country store. When asked if she would be willing 
to ship it to a city by parcel post, and at what price, she replied that 
she would do so at 50 cents a pound. Would-be purchasers fre- 
quently have been known to offer producers a lower price than they 
can obtain in their local markets. It is needless to say that such 
imperfect and erroneous ideas as to proper and equitable price 
altogether defeat the possibility of marketing produce by parcel post. 
Business in marketing by parcel post can be secured and held only 
by shipping produce of high quality and by charging reasonable 
prices. 

The larger the quantity, within the postal limits, that is shipped 
at any one time the more economical is the factor of postage and 
therefore the more attractive from the viewpoint of cost both to the 
producer and to the consumer. This applies both to shipments and 
to the return of empty containers. It would not be economical to 
secure half a dozen different kinds of vegetables .from as many 
different producers, but if a supply of half a dozen kinds of vegetables, 
or vegetables and fruits, could be obtained in one parcel from one 
producer it would be both advantageous and attractive. 

Another advantage to the producer in parcel post marketing is 
that his mail box or local post-office becomes his shipping station. 
This relieves him from any extra trip in order to make shipment, as 

1 Adapted from Farmers' Bulletin 703, pp. 9-1 1, 2. 



MARKET METHODS AND PROBLEMS 541 

the rural mail carrier takes the shipment from the mail box or some 
member of the farmer's family and deposits it at the post-office when 
going to call for the mail. 

Many farmers often have a small surplus of produce, not needed 
for home consumption, which could be marketed if some ready means 
of getting it to a consumer were available. The parcel post supplies 
this medium. There are also many supplemental or side lines of 
production which could be developed for the same purpose. 

Mutual confidence and helpfulness are needed in order to suc- 
ceed; co-operation is needed. Consumers are interested in buying 
by parcel post only when they can secure more satisfactory produce, 
some advantage in price, or both. The producer will not be inter- 
ested in marketing by parcel post unless it means some additional 
net return to him. A high quality of produce, well prepared, care- 
fully and attractively packed, and forwarded so as to reach its desti- 
nation at the time desired will go a long way toward the establishment 
and continuance of business. Ordinary or inferior produce will not 
only lose a customer but hinder the gaining of others. The producer 
must aim to give satisfaction by supplying his customers, as nearly 
as possible, with produce which meets their individual desires. The 
consumer must also aim to give satisfaction by properly caring for 
and returning containers, making prompt remittances as agreed upon, 
and by doing his part in all phases of the transaction. In other 
words, a square deal is needed. 

Quality and appearance of produce. — It is probable that the point 
which will make the strongest appeal to the average consumer is that 
he can secure by parcel post a fresher, brighter, more attractive, and 
thus possibly a better product than he can obtain otherwise. Pro- 
ducers should remember always that the appearance of fruit and 
produce is one of the strongest factors in making a sale; it will not 
pay to market anything but standard and fancy produce by parcel 
post; and the surest way to establish a dependable, continuing, and 
increasing business is to forward nothing but strictly reliable and 
satisfactory produce. 

One of the most important requirements is the bringing of the 
producer and the consumer into business contact. This may be 
attained (1) by personal acquaintance; (2) through the acquaintance 
of a third person; (3) by advertising in an appropriately selected 
paper; (4) by personal canvass; and (5) through the post-office in 
the city or town in which a customer is sought. 



542 



AGRICULTURAL ECONOMICS 



Once a satisfactory parcel post business is established with or 
through an acquaintance, other customers are likely to be secured 
through the first one. Advertising frequently may bring the pro- 
ducer into touch with a prospective purchaser. Some papers run a 
special parcel post advertising department or section, and a brief but 
well-worded advertisement often will bring results. 

Another method is for the producer to make a personal canvass 
in a residence section of the town or city selected. Good, represen- 
tative samples of the produce available at the time doubtless will 
help to secure the first sale. 

The postmasters in 35 cities of the country, under the direction 
of the Post-Ofhce Department, have instituted campaigns intended 
to foster parcel post marketing. The names and addresses of pro- 
ducers, together with the produce offered, are listed for distribution 
to the patrons of the offices; and some of these postmasters issue 
for distribution to producers, lists of consumers who wish to buy. 

The cities are as follows: 



Athens, Ga. 
Atlanta, Ga. 
Austin, Tex. 
Baltimore, Md. 
Birmingham, Ala. 
Boston, Mass. 
Brooklyn, N.Y. 
Chicago, 111. 
Cincinnati, Ohio 
Cleveland, Ohio 
Dallas, Tex. 
Denver, Colo. 



Detroit, Mich. 
Galveston, Tex. 
Hartford, Conn. 
Indianapolis, Ind. 
La Crosse, Wis. 
Lawrence, Mass. 
Lincoln, Neb. 
Los Angeles, Cal. 
Louisville, Ky. 
Lynn, Mass. 
Minneapolis, Minn. 
Nashville, Tenn. 



New Orleans, La. 
Philadelphia, Pa. 
Portland, Ore. 
Providence, R.I. 
Richmond, Va. 
Rock Island, 111. 
San Francisco, Cal. 
Seattle, Wash. 
St. Paul, Minn. 
St. Louis, Mo. 
Washington, D.C. 



Note. — On the following page is shown a sample of such lists .- 
Editor. 



MARKET METHODS AND PROBLEMS 



543 



Vol. i 



Chicago, Illinois, December i, 1915 



No. 



The following producers have signified their desire to be listed as shippers of 
produce by Parcel Post. A postal card or letter to one or more of them will afford 
the consumers an opportunity of making comparison of prices. Every effort will 
be made to expedite without any unnecessary delay, the delivery of all perishable 
shipments, thereby insuring to the consumer fresh products from the farm and 
dairy. The cordial co-operation of the public toward the success of the Farm 
to Table plan is invited. 

D. A. Campbell, Postmaster 



Name 

Wm. Awecamp 

H. H. Aldrich 

J. A. Anderson 

Mrs. Wm. Binning. . . 

Chas. Beesch 

W.B. Burk, 

Sunny Ridge Farm 
L. Burchett & Son. . . 

Etc., etc. 



Address 

Shobonier, 111., Route 1 
Hamilton, Ind., Route 1 

Etna Green, Ind 

Marathon, Iowa 

Orchard Place, 111 

Hamilton, Ind 

New Holland, 111.:.... 



Kind of Produce 



Eggs, poultry _ 

Eggs, poultry, jellies, maple sugar 

and syrup 
Eggs, poultry, butter, fruits in 

season 
Poultry, cream, eggs, butter, 

celery 
Apples and vegetables 

Eggs 

Apples, honey, butter, lard, pork 
sausage in season 




172. ASSISTANCE FROM THE EXPRESS COMPANY 



Weekly Farm -to -Table Bulletin 



Any agent will take your order. 

He will receive it from you personally, by letter or by 
telephone. 

We recommend sending a remittance with each order to cover 
"Country Cost." 

Add money order fee as shown below to the cost of produce 
order from each shipping point. 

Checks on local banks to order of Wells Fargo & Co. will be 
accepted. 

We remit to the farmer by Express Money Order. 



544 AGRICULTURAL ECONOMICS 

Money orders protect both producer and consumer and insure 
promptness in filling orders. 

Orders not over $ 2 . 50 — Money Order fee 3 cents 



u 


a 


u 


5.00— 


a 


a 


a 


5 


u 


u 


a 


a 


IO.OO — 


a 


a 


u 


8 


11 


li 


a 


u 


20 . OO 


u 


a 


a 


10 


u 


a 


a 


a 


30.00— 


u 


a 


u 


12 


a 



"Country Cost" represents the f.o.b. price quoted us by pro- 
ducers. 

"Cost Delivered" is "Country Cost" plus express charge on the 
produce to this city. 

Any quantity may be ordered but less than 10 or 15 pounds will 
not usually be economical. I 

Article Shipping Point How Put Up Country Cost Cost Delivered 

Pasteurized Creamery Butter 
Pound Prints 



Galesburg, 111. 


30 lbs. 


•30 


3i* 


Lohrville, Iowa 


+30 lbs. 


.29 


31 


a a 


10 lbs. 


• 29! 


34 


Maquoketa, Iowa 


+ 10 lbs. 


(Del'v'd) 


3*i 


Tiffin, Ohio 


+30 lbs. 


30 


3i* 



Combination packages 

Combination package containing twelve (12) dozen eggs and ten (10) pounds of 

butter from Lohrville, Iowa, is $6 . 66 delivered in Chicago. 
Combination package containing twelve (12) dozen eggs (in Cartons) and 

eight (8) pounds of butter from Maquoketa, Iowa, is $5 . 80 delivered in Chicago. 
Combination package containing four (4) pounds of butter, four (4) one dozen 

cartons of eggs, two (2) i£ pound milk-fed 1916 broilers, $3.55, f.o.b. Tiffin, 

Ohio. 
Combination package containing two (2) pounds of butter, two (2) one dozen 

cartons eggs and two (2) i| pound milk-fed 19 16 broilers, $2.45, Tiffin, Ohio. 
Express rate from Tiffin to Chicago is 26 cents for 10 pounds, 29 cents for 15 

pounds, and 32 cents for 20 pounds. 

Fresh eggs Anthony, Kan. 30 doz. . 23 . 27^ 

" " Camp Point, 111. 30 doz. . 23^ . 255 

" " Bolivar, Mo. 30 doz. .21 .24^ 

Buckwheat flour Oakland, Md. ■ 1 61b. cartons .50 .89 

Cheese Monroe, Wis. 

Swiss cheese, per pound .35 

Bricks (six pounds each), per brick 1.35 

Limburger (two pounds each) , per brick . 45 

These prices are f.o.b. Monroe, Wis. Express rate to Chicago on 12 lbs. is 25 cents, on 25 lbs. it 

is 31 cents. 

Meat lb. lb. 

Pork sausage Thiensville, Wis. (21b. pkgs) *.20 *.2 2 

Bacon Buffalo, N.Y. 6- 8 lbs. *.2o| *.23 

Bacon Ft. Wayne, Ind. 6- 8 " *.2 7 *.2 9 

Ham " " 8-10 " *.i 9 *.2i 

*Will ship combination to suit trade of their products. In order to secure products thus 

marked (*) shown "Cost delivered" the quantity must aggregate fifteen (15) pounds. 



MARKET METHODS AND PROBLEMS 545 

173. PUBLIC MARKETS 1 
By J. W. FISHER 

Public markets afford a profitable outlet for the farm products of 
growers located within hauling distance of many large cities. These 
markets may be either municipally or privately owned. Selling may 
be either at wholesale or retail, although in many cases both selling 
methods are allowed. Customarily the sites consist merely of an 
uncovered tract set aside for this purpose, where space sufficient for 
the grower's wagon is rented at an average charge ranging from 10 
to 25 cents per day. The site may be improved by the erection of 
sheds or even a specially constructed market house. In the latter 
instance the interior is portioned into stalls which usually are rented 
to regular wholesale or retail dealers who buy from the producers. 

The grower who sells on the public market has the advantage of 
being able to ascertain available supplies and thus arrive at a fair 
market price. He secures the advantage of competitive buying by a 
large number of dealers who are attracted by a wide variety of products 
in plentiful supply. 

In certain places where municipalities have failed to provide 
facilities of this character, the growers themselves have organized, 
purchased tracts of land in the city, and developed their own trading 
place. 

Public markets are important factors in the distribution of farm 
products in many eastern cities, and although they are not quite so 
usual in the West, they constantly are receiving more attention. 

E. Co-operative Sales Agencies 

174. CO-OPERATIVE SELLING OF GRAIN AND LIVE STOCK 
IN MINNESOTA 2 

By L. D. H. WELD 

On January 1, 1914, there were practically 270 farmers' elevators 
in Minnesota with an aggregate membership of approximately 34,500, 
an average of 128 members to a company. One farmer out of every 
five in the state is a member of a farmers' elevator company. The 

1 From Bulletin 266, United States Department of Agriculture, p. 10. J. H. 
Collins and Wells A. Sherman, joint authors. 

3 Adapted from "Statistics of Co-operation among Farmers in Minnesota.'* 
Bulletin 146, Agricultural Experiment Station, University of Minnesota, pp. 11-1S. 



546 AGRICULTURAL ECONOMICS 

aggregate volume of business of these companies for the year follow- 
ing the harvesting of 191 2 crop was about $24,000,000, of which about 
$22,000,000 represents the value of grain marketed, and the other 
$2,000,000 the value of supplies, such as coal, feed, twine, etc., pur- 
chased for members. 

Many so-called "farmers' elevators" in Minnesota are not owned 
by farmers and should not be classed as co-operative companies. 
Even among the 270 elevators classified herein as co-operative, there 
are many which certain co-operation enthusiasts would undoubtedly 
exclude. But in all of the 270 elevator companies farmers own the 
majority of stock, and in all but 5 . 5 per cent of them each stock- 
holder has but one vote irrespective of the number of shares owned. 
Furthermore, in five-sixths of the companies the number of shares 
that may be owned by one person is limited. In other words, the 
elevators are not only owned by the farmers themselves, but they are 
controlled democratically by them. 

The patronage or pro rata dividend, that is, the division of profits 
over and above a fair rate of interest on stock according to the busi- 
ness brought by each patron, is highly desirable and should be pro- 
vided for in the by-laws of every farmers' elevator company. It is 
in this respect that the farmers' elevators of Minnesota fail to satisfy 
to the fullest extent the generally accepted essentials of co-operation, 
because only 26 per cent of the companies distribute profits in this 
way. There is some doubt about the desirability of laying so much 
importance on the patronage dividend, however, as an absolutely 
necessary feature of a co-operative organization. If an organization 
is run on a no-profit basis, as in the case of the great majority of 
Minnesota creameries, there is nothing to be distributed on a patronage 
basis. In co-operative stores, on the other hand, the patronage 
dividend is an absolute essential, because the only safe way to operate 
a store is to charge current prices as do competitors, a policy which, 
if the store is well managed, should yield a profit over and above a 
fair return on capital invested. 

The farmers' elevator occupies a middle ground in this respect; 
under able management it can often be operated on practically a 
no-profit basis, but there are certain risks, especially in the handling 
of such grains as barley and flax, which render it dangerous to shave 
the margins too close, and the usual method is for elevators to pay cur- 
rent prices as shown in the daily grain bulletin. If the farmer's grain 
is graded and docked correctly by the manager, there should normally 



MARKET METHODS AND PROBLEMS 



547 



be a profit, and hence the patronage dividend is a desirable feature. 
Out of 139 companies reporting dividends paid on stock, 59, or 42 .4 
per cent, paid no dividends, 14 . 2 paid rates from 2 to 7 per cent, 
30.9 per cent paid at the rate of either 8 or 10 per cent, and only 
12.7 per cent of the total number paid rates above 10 per cent. 
Although several of the companies which paid no dividends actually 
lost money, most of them had small profits which were thrown into 
reserves. Of those that paid dividends, 10 per cent was the com- 
monest rate. Out of the 42 elevators that have the patronage 
dividend, 16 pay stock dividends or 10 per cent before distributing 
anything on a patronage basis, and 13 pay 8 per cent. In other words, 
8 or 10 per cent is apparently considered a fair return on capital 
invested. The highest rate of dividends paid by any elevator was 
125 per cent, but this elevator has since changed to the patronage 
basis. 

The majority of farmers' elevators undertake the co-operative 
purchase of supplies, such as coal, flour, feed, binder twine, seeds, etc., 
for their patrons. 

The most important recent development in co-operative marketing 
in Minnesota is the formation of live-stock shipping associations, and 
in this respect also Minnesota is by far the leading state in the country. 
The movement began in 1908 and has been spreading very rapidly, 
especially since 191 1. The number of associations is placed at 115 
on January 1, 19 14, but many have been organized since that date. 
The total value of live-stock marketing through these associations can 
only be estimated. The average for 61 associations in 19 13 was 
$59,692 per association, but many of these associations had been 
formed during the year and hence their reports cover less than twelve 
months. The estimated figure of $6,000,000 would seem to be fairly 
conservative. This amounts to about 12 per cent of the value of 
live-stock marketed by Minnesota farmers. 



T , I Average per 

lotal ' Association 



Carloads of stock marketed 

Cattle marketed 

Hogs marketed 

Calves marketed 

Sheep marketed 

Average expense per association . 
Average expense per 100 pounds. 



4.500 

3-300 
■50,000 
30,000 
1 5 ,000 



44 7 
329 

405 

IQ2 
$2,760 
$ 0.33 



548 AGRICULTURAL ECONOMICS 

It will be observed that the average expense per ioo pounds is 

33 cents. This includes not only the freight (usually to South St. 
Paul), yardage, switching, commission, etc., but also the salary of the 
manager of the association, who is ordinarily paid on the basis of a 
certain amount per hundred weight (usually 6 cents), as well as a 
small amount commonly set aside from each shipment for a sinking 
fund. Under the old method of marketing live-stock through local 
buyers, the margin between the farmer and the purchaser at the ter- 
minal market is much greater, running from 40 to 75 cents per hundred 
pounds, and sometimes higher. By assuming 50 cents as an extremely 
conservative estimate, the shipping associations saved the farmers of 
Minnesota over $1,000 per association in 1913. In view of the fact 
that there is no investment of capital necessary, and since this estimate 
is very conservative, the economic value of shipping associations 
becomes readily apparent. 

Co-operative creameries and cheese factories are also to be classed 
as marketing agencies. Of the former there are 614 and of the latter 

34 in Minnesota. Seventy-two per cent of all creameries in Minne- 
sota are co-operative, and there is no other important dairy state 
where the butter industry is controlled to such an extent by the 
farmers themselves. 

175. CO-OPERATIVE MARKETING OF VEGETABLES 1 
By L. C. CORBETT 

Co-operation among growers of vegetables solves the problems of 
the package by making it uniform and standard, it guarantees the 
pack by employing competent inspectors, and insures uniformity of 
grade. Co-operative action enables the co-operators to act as an 
independent individual, and since they employ a uniform package, a 
standard pack, and uniform grades a given product of a community 
can be shipped in carload lots at a lower rate than is possible by local 
freight or express, thus effecting a decided saving. A uniform package 
and a standard pack and grade give a product a standing in the market 
which enables it to be sold for what it really is, because the guaranty of 
the association is behind it. 

Another advantage which often follows is a local or direct sale, 
f.o.b. shipping point. In the eastern portion of the country the f.o.b. 
sales have been made on the basis of New York prices current. The 

1 Adapted from Yearbook of the Department of Agriculture, 1912, pp. 355-61. 



MARKET METHODS AND PROBLEMS 549 

distribution of products to many consuming centers rather than con- 
gestion in a few is one of the most valuable results secured by co- 
operative action. Cities which are large enough to handle a single 
commodity in carload lots when it is purchased from the producer 
receive their goods direct rather than by a diverted shipment or by 
reshipment. The product reaches the market quicker and in better 
condition, and the price to the consumer or to the handler in the small 
town is reduced by one freight charge and sometimes also by the cost 
of commission or jobber's profit. One association has been able to 
sell over 90 per cent of the truck handled by it f.o.b., and this has 
resulted in a saving of over $150,000 annually on a $2,000,000 business. 
In other words, the freight charges were paid by the purchaser instead 
of by the producer, thus saving to the community the cost of trans- 
porting their products to the centers of consumption or distribution. 

Towns too small to handle " straight" cars of a single commodity 
with the possible exception of potatoes, can be served in the same 
manner as large towns by a system of loading which has been devised 
by some of the railways receiving products from the trucking dis- 
tricts. This system consists in loading mixed cars to order, so as to 
supply the needs, as near as may be, of the town to which the ship- 
ment is made. This method of handling mixed cars accomplishes a 
very desirable result, in that it widens the distribution of the product 
by reaching towns too small to handle solid cars of a single commodity 
and enables the dealers to purchase direct from the producer, thus 
insuring all the advantages of direct shipment possible by any other 
system of carload shipments. By the adoption of a carefully planned 
cropping system in the several producing centers from which such 
shipment is to be made a very satisfactory arrangement for both the 
producer and the consumer can be worked out. 

If the products of various centers are to follow in succession to the 
same markets and are to be handled on the basis of sales f.o.b. shipping 
point, the producers must not only maintain standard packs and 
grades which are uniform, but they must also be in touch with the 
markets in such a way as to insure prompt and satisfactory disposal 
of their products. At present this is accomplished by wide-awake, 
active dealers who know the markets and the producers as well, and 
by purchasing in one locality in January, in another in February, and 
so on from season to season, thus keep their customers supplied from 
the beginning to the end of the period. Neither independent pro- 
ducers nor associations of growers with fixed fields of production can 



55© AGRICULTURAL ECONOMICS 

do this. They reach the market only during the period their crops 
are moving. What is accomplished by the independent dealer might, 
however, be accomplished by co-operation among various local asso- 
ciations of producers. Through a federation of such associations a 
marketing expert might be maintained who would move with the 
season from one center to another. By so doing, the markets would 
deal continually with the same individual, the grades and packs would 
be uniform, because censored by the same authority at each loading 
point. In this way the community might accomplish for itself what 
is now taken advantage of by shrewd and wide-awake dealers. 

Under the system of independent action producers are creatures 
of circumstances over which they have no control. At harvest time 
they have little conception of the competition they will have to meet 
in the market, unless the crop is so short that it has become a matter 
of comment. As a rule the dealers see to it that the reports on crop 
prospects are high enough to enable them to buy the harvest at a 
reasonably low figure. It is never discovered that the crop is a little 
short until after it has all left the hands of the grower and is safe in 
the storerooms of the dealers. 

Dealers keep an accurate forecast of the crop and as a rule have 
a good basis for their action. Growers have not done this except in 
a few instances, and then with marked advantage. Co-operative 
growing associations should establish through some central organiza- 
tion a plan by which accurate forecasts of crop prospects can be fur- 
nished. These forecasts should begin with the acreage in each crop 
zone and end with a statement of the harvest. These reports should 
be made at frequent intervals and should be based on accurate per- 
sonal canvass by competent judges. A few seasons' records for any 
given locality will suffice to furnish a basis for determining the safe 
acreage for that section and to fix the planting and harvest dates, as 
well as to indicate the normal product which may be expected from 
a given acreage. Statistics of this character would provide a basis 
for working out a rational system of crop rotation and crop production. 

Co-operative action with products which can be stored enables the 
producer to distribute the product throughout the consuming period 
in such a way as to meet the requirements of the market without over- 
loading it and depressing prices. With vegetable products, such as 
Irish potatoes, sweet potatoes, and squashes, this is a very important 
consideration; the trade quickly determines the center of supply, and 
as soon as the markets create a demand the supply can be forthcoming 



MARKET METHODS AND PROBLEMS 551 

in a regular, systematic manner, so as to cause the least loss to pro- 
ducer, handler, and consumer. Under this system storage products 
should never be compelled to beg a market; the demand will always 
find the supply. The chief advantages, therefore, of co-operative 
action are standard grades, standard packs, uniform packages, ship- 
ment in carload lots, f.o.b. sales, a controlled rate of dispersal, pre- 
determined destination, dispatch in the settlement of claims, and 
regulation of rates of transportation and of sales, so as to give each 
producer a standard price for a standard product. 

To accomplish this is a difficult task. Human nature is the most 
variable and the least controllable commercial commodity. Co- 
operation means united action, and true co-operation in the sense in 
which it is used in this connection means united action for the benefit 
of all concerned — the producer as well as the consumer. Co-operation 
which involves financial risk and financial responsibility has never 
proved successful when based on fraternal agreement alone. To suc- 
' ceed in any business enterprise which requires the concerted action of 
individuals of different training and different temperaments, there 
must be a common bond of union of sufficient importance to give them 
a common interest. This can be secured in the business world only 
through a money consideration. In order, therefore, that co-operative 
action involving the growing, handling, transportation, and sale of 
perishable products may be successful it must carry a financial obli- 
gation sufficient to command the interest of the co-operators. It is 
true that in an association of this character the participants place at 
stake the return of their labor in the form of the crop produced, but 
in order to insure the patronage and the loyalty which is necessary 
to the stability of any co-operative action a membership requirement 
must be made sufficiently large to prevent a member from withdrawing 
from the association for slight cause. A method which has been suc- 
cessfully used in some of the associations is to require a cash member- 
ship fee sufficient to raise the required capital for conducting the 
business of the association. 

The amount of capital stock will vary with the character of the 
association, whether it be a growing and distributing organization or a 
growing, distributing, and purchasing organization. In order to pur- 
chase supplies for its members the organization will require a much 
larger capital than will be necessary for a growers' and distributors' 
organization. That would be in the neighborhood of $2,000, while 
the stock necessary to add the purchasing and handling feature must 



552 AGRICULTURAL ECONOMICS 

be from $10,000 to $50,000. The cash membership fee should in few- 
instances be less than $25. If the requirements of the association 
demand larger capital the membership fee must be increased propor- 
tionately. In addition to the cash membership requirement a bond 
should be given in the form of a promissory note executed by each 
member in favor of the association, this bond to be held in trust as long 
as the member remains in good standing, to serve as a guaranty for 
faithful adherence to the constitution and by-laws of the association. 

The benefits of co-operative action in growing, transporting, and 
selling farm products cannot be fully realized unless the members of 
the association each and severally consider themselves delegated to 
protect the interests of the association from criticism or dissension 
from within, which would tend to limit the usefulness of the asso- 
ciation, and they should also safeguard their community interests by 
discouraging the formation of competing associations. Co-operative 
competition is equally as destructive as individual competition. 
Unfortunately, in some instances growers have not realized that the 
formation of competing organizations, although each of them is co- 
operative in its nature, is destructive to the best interests of the 
community as a whole. In fact, the organization and development 
of factional or competing associations in a community have been one 
of the favorite devices of those antagonistic to the success of the 
co-operative movement. 

The basis on which the association secures its revenues is an 
important consideration, as is also the method of settlement with its 
members. Revenues are essential to meet salaries and legitimate 
operating expenses. The income of the association may be derived 
from a commission on sales or from a flat rate per package for goods 
handled. Either of these systems will prove satisfactory. The one 
which seems to meet best the requirements of a particular association 
should be adopted. In some instances the moneys received from the 
sale of products, less a commission or deduction for the charge of 
selling, are returned direct to the individual furnishing the products. 
In other instances, where the products are given a uniform brand 
and are sold on grade, so that the individual's product is lost sight 
of, the returns for a given period are pooled and are prorated among 
those contributing to the sales during that particular period. A short 
pooling interval is desirable in order that growers who succeed in 
producing early crops, which often command a higher price, may be 
given the benefit of this advantage. 



MARKET METHODS AND PROBLEMS 553 

Since high-grade talent must be secured in connection with the 
successful development of the co-operative marketing system, most 
organizations have found it advantageous to extend the activities of 
the institution to the purchase of consumable supplies. The object 
is to provide profitable continuous employment for a competent 
manager, rather than to attempt to operate on an intermittent plan. 
Competent executives cannot be had except on a permanent basis. 
It is evident, therefore, that unless the activities are extended few 
associations will be able to afford high-grade management. 



F. Government Market Bureaus 
176. CALIFORNIA'S " STATE COMMISSION MARKETS" 

a) THE LAW 1 

The people of the State of California do enact as follows: 

Section i. There is hereby created the state commission mar- 
ket, a state organization to carry on the business of receiving from the 
producers thereof, the agricultural, fishery, dairy, and farm products 
of the State of California and the selling and disposing of the same 
on commission, as herein provided. 

Sec. 2. The state commission market shall be under the manage- 
ment and control of a governing body of one person, to be known as 
the state commission market director, who shall be appointed by the 
governor of the State of California. 

Sec. 3. The commission market director shall establish and 
maintain in any and all cities and towns in the state where and when 
the conditions are in his judgment most suitable, depots or stations 
to be used as commission markets, for the receiving, care, sale, and 
distribution of the agricultural, fishery, dairy, and farm products of 
California, and the director shall establish and maintain an executive 
office or headquarters at Sacramento. 

Sec. 4. The commission market director shall make all neces- 
sary rules and regulations, and change the same when necessary, for 
the operation and carrying on of the state commission market, and 
shall print the rules for free distribution to all persons who wish to 
avail themselves of the privileges of the market, whether buyers or 
sellers, and all buyers and sellers shall conform to such rules and regu- 
lations in order to claim any right under this act. 

1 Chap. 713, Acts of 1915 (Assembly Bill No. 318). Approved June 10. 1015. 



554 AGRICULTURAL ECONOMICS 

Sec. 5. All producers of agricultural, dairy, or farm products, or 
products manufactured or processed therefrom, or fishery products, 
which shall have been grown, raised, produced, processed, or manu- 
factured within the State of California, or caught in the territorial 
waters thereof, shall have the right to consign and deliver such prod- 
ucts to the state commission market, at any of its depots or branches, 
for sale and distribution. 

Sec. 6. The state commission market shall receive and care for 
all produce consigned and delivered to it under the provisions of this 
act, and shall sell and distribute to dealers, consumers, and all buyers 
such products to the best possible advantage of the producer; and, 
to the end that the state commission market be self-supporting, shall 
charge a commission for the handling of all products in an amount 
which in the judgment of the director is just and reasonable. All 
settlements with producers shall be made once a month or oftener, 
and the market shall retain the commission charged. 

Sec. 7. The director shall have power to rent, lease, occupy, and 
use all such lands and buildings as may be needed 

Sec. 8. The market shall have a bureau of correspondence for 
gathering and disseminating information on all subjects relating to the 
marketing of California products, and shall issue booklets thereon, 
and by every practicable means keep the producers informed of the 
supply and demand and at what market their products can best be 
handled. 

Sec. 9. The term of office of the director shall be four years or 
until his successor be appointed by the governor, and the annual 
salary of the director shall be five thousand dollars. The first appoint- 
ment of director shall be made upon this act going into effect. The 
legislature, by a two-thirds vote, may remove the director for mis- 
conduct, neglect of duty, or incompetency. 

Sec. 10. The state commission market shall have a secretary, 
who shall be appointed by the director and hold office at his 
pleasure, and shall perform such duties as he may prescribe. The 
annual salary of the secretary shall be three thousand six hundred 
dollars. 

Sec. 11. The market shall have a seal, bearing the inscription 
" State Commission Market of California," which seal shall be affixed 
to all such instruments as the director shall require. 



MARKET METHODS AND PROBLEMS 555 

Sec. 13. The director shall not engage in any other line of busi- 
ness during his term of office, but shall devote his whole time, atten- 
tion, and ability to the duties of his office. The -director shall not 
hold any stock or other interest whatsoever in any produce com- 
mission business. 

Sec. 14. There is hereby created a fund to be known as the 
" state commission market fund." All fees, charges, and costs col- 
lected by said market under this act shall be paid into the treasury of 
the state to the credit of such fund. All appropriation made by this 
act or any subsequent act for the use of the market, shall be placed 
to the credit of such fund. All expenses of whatsoever nature, 
incurred by the market under the provisions of this act, shall be paid 
from the said fund, after being approved by the director, upon claims 
therefor to be audited by the board of control. 

Sec. 15. There is hereby appropriated out of any money 
in the state treasury not otherwise appropriated, the sum of 
twenty-five thousand dollars, to be used by said director in estab- 
lishing and carrying on the state commission market provided for 
by this act. 

Sec. 16. The director shall make [annual report] .... 

Sec. 17. The director [shall give bond] .... 

Sec. 18. Sufficient commission for the handling of produce shall 
be charged by the market to gradually build up a revolving fund in 
a sum equal to the original appropriation, such fund to be used as 
required in the operation or extension of the market. 

b) THE MARKET DIRECTOR'S VIEW OF HIS TASK 1 

By Harris Weinstock 

To carry out this broad and comprehensive scheme, the legislature 
has appropriated (as a mere beginning, I take it) the sum of $25,000. 
Of course, if the Market Director were to attempt to carry out the 
full letter of the law, in the hope of handling the $200,000,000 or more 
of the farm products of California, it would require on the part of the 
state, for warehouses alone, an investment of millions. 

Speaking for myself, I should not deem it expedient for the state 
needlessly to make such investment, and to involve itself in all the 
burdens and responsibilities inseparable from wholesaling and retailing 
farm products. The time may come when this may be necessary, 
but, in my opinion, the time is not at hand. The hope that I have 

1 From a circular "To the People of California," December 1, 1915. 



556 AGRICULTURAL ECONOMICS 

in mind, along the lines of remedying existing marketing evils, lies, 
among other lines, in the utilization on the one hand of existing 
machinery for the distribution of farm products and, on the other 
hand, to aiding and directing the producers scientifically to do their 
own marketing. The state will have performed its highest function, 
in my opinion, when it will have aided the producer to help himself. 

What better object-lesson is needed to show the evil results of a 
lack of organization and the beneficent results of organization than 
is presented by the California raisin industry? Only a few brief 
years ago the grower was obliged to sell at as low as one and a half 
cents a pound, which, of course, meant ultimate ruin. By perfecting 
a selling organization, he is now receiving between three and four 
cents a pound, which means a living price and all that a living price 
spells. The California citrus industry presents perhaps the most 
remarkable object-lesson of the benefits of collective action, but 
there must be collective action, not alone on the part of 60 per 
cent of the producers, as now in the citrus industry, but on the part 
of producers of 100 per cent of the product. It should be one of the 
aims of the Market Director to bring about such collective action on 
the part of the 100 per cent of the producers, and to this end I now 
dedicate myself. Even though such result may be unattainable, it 
is certainly worthy of most earnest effort, because the success of such 
effort means the salvation of the industry. 

There are two distinct markets for the farm products of California : 
the market in California, which may well be called the "home" 
market; and the market outside of California, which may be called 
the "eastern" market. The records show that the home market con- 
sumes only about 5 per cent of the farm products of the state, the 
remaining 95 per cent being consumed outside of the state. It must, 
therefore, be plain that the situation which should command first 
attention is the eastern market; since it is not possible for any one 
market director to cover all the territory for all the products as speedily 
as all the producers would like to have it covered, it is evident that a 
great deal of patience and forbearance will have to be exercised on the 
part of many of the producers, until their time shall have arrived. 
It is my intention to concentrate upon such products as are chiefly 
marketed in the East that most need attention — such, for example, 
as the dried peach product, the olive product, and the citrus products. 
After carefully surveying the ground and after thoroughly familiarizing 
myself with eastern marketing conditions (which I am now engaged 



MARKET METHODS AND PROBLEMS 557 

in doing), I shall be better able intelligently to decide upon which 
product first to concentrate. 

Singly and alone I can, of course, hope to do very little. My 
chief success must come from winning and holding the earnest and 
hearty co-operation of the producers and distributors; without their 
support, failure is inevitable; with their support wonders can be 
accomplished. The present is the first Market Commission created 
in California and I am the first Market Director ever appointed in 
California. I have no precedents to guide me. The work right from 
the first hour must be creative and constructive in character. I 
doubtless shall make my fullest share of mistakes, but I am sure that 
my friends will regard them as mistakes of the head and not of the 
heart, and I am also sure that I -will earnestly endeavor to avoid 
repeating the same mistakes. One of the avenues from which I hope 
to obtain much support and much aid is along the lines of an advisory 
board. This advisory board, as the situation now looks to me, will 
be composed of fifteen directors of the California Development Board, 
with its group of merchants, bankers, manufacturers, and transporta- 
tion experts, to which may be added an equal number of representa- 
tives of the organized producers of the state, from which joint group 
a committee may be created to deal with each separate phase of the 
problem as an aid and as advisors on the marketing commission. 

Undertaking this task as I do, with an open mind, I shall heartily 
welcome all hints and suggestions, no matter how humble may be the 
source from whence they come. I know that much will be expected 
from the Market Director; I know that I myself have established for 
him very high standards. If I can only in a remote way approximate 
the expectations of the producers of the state and the standard which 
I have established for myself, I shall feel that my work will not have 
been altogether a failure. 

And now, as I go to the task assigned me, I shall give to it the 
best that is in me. All that the years of my business training have 
taught me, all that I have learned in many kinds of public service, 
and all of the ideals which have guided me in both private and public 
life, are hereby dedicated to this service. All that I ask in return is 
some small recognition of the simple fact that I am trying to render 
an exceptionally difficult service, and that I shall need the forbearance 
and the support of all producers, distributors and consumers who 
realize what the success of this new state commission market can be 
made to mean to the entire state. 



55 s AGRICULTURAL ECONOMICS 

177. WORK OF THE OFFICE OF MARKETS AND RURAL 
ORGANIZATION 1 

By CHARLES J. BRAND 

It is believed that effective and economical methods for distribut- 
ing and marketing farm products should go hand in hand with scien- 
tific methods of production, as it profits little to improve the quality 
and increase the quantity of our crops if we cannot learn when, where, 
and how they may be sold to advantage. To provide for a study of 
the problems involved, Congress during the spring of 19 13 appro- 
priated funds for the establishment and operation of the Office of 
Markets of the Department of Agriculture. The Office of Rural 
Organization was established by Congress a year later, in order to 
determine the possibilities and encourage the use of organized co- 
operative effort in improving rural conditions. These two offices 
were combined on July 1, 19 14, and the combined unit is known as the 
Office of Markets and Rural Organization. 

The authority conferred by Congress in appropriating funds for 
the maintenance of this Office provides "for acquiring and diffusing 
among the people of the United States useful information on subjects 
connected with the marketing and distributing of farm and non- 
manufactured food products and the purchasing of farm supplies," 
and the study of co-operation among farmers in the United States. 
So far as marketing work is concerned, the activities of the Office, 
therefore, are limited to the collection and distribution of information. 
For example, it has no authority to prosecute cases of alleged dis- 
honesty on the part of producers, carriers, dealers, or buyers. It has 
nothing whatever to do with the problems of production. 

It has been found that co-operative marketing has been carried 
on in the United States to a much greater extent than was supposed. 
It has been estimated that over a billion dollars' worth of agricultural 
products are sold each year by co-operative marketing organizations. 
The investigations undertaken include a study of successful buying 
and selling organizations in this and foreign countries to discover their 
strong and weak points and the reason for the failure of organizations 
which have been unsuccessful. 

To be successful in eliminating wastes the cost of each step in the 
marketing and distributing of agricultural products must be accu- 

1 Adapted from an announcement of the Office of Markets and Rural Organi- 
zation. 



MARKET METHODS AND PROBLEMS 559 

rately ascertained. Wastes and excessive profits must be discovered 
before they can be eliminated. For this reason the Office of Markets 
and Rural Organization is conducting investigations of the business 
practices of co-operative and non-co-operative marketing, distribut- 
ing, purchasing, and rural business organizations, and other agencies 
engaged in the marketing, distributing, and storing of farm products, 
paying especial attention to office organization, accounting systems, 
methods of auditing, office appliances and equipment, and plans of 
financing. Systems of accounts are being devised for various types 
of organizations and other agencies; one for co-operative grain eleva- 
tors has been completed, tried out successfully in actual operation, 
and now is available for use. Over 200 elevators have made arrange- 
ments to instal this system this year. Other systems have been 
devised for fruit exchanges, produce associations, live-stock shipping 
associations, and poultry circles. After a thorough test of their 
practicability the accounting systems devised by the Office are made 
available for all, and when practicable active assistance is rendered 
in their installation. Systems of accounts also are being outlined for 
firms doing a commission business in agricultural products, with the 
view of devising something which may be adopted ultimately as a 
uniform system by the trade. 

Marketing surveys are also being undertaken, in order to secure 
accurate and comprehensive data concerning market methods and 
costs and to ascertain the practicability of a market news service. 
This part of the work includes surveys of the consumption of specific 
products in definite localities, as well as a determination of the market 
produced within certain shipping areas. An important part of the 
investigation is a study of the relation of prices to receipts in impor- 
tant distributing centers, with a view to determining the point at 
which the market becomes glutted, the prices falling so low as to 
render shipments unprofitable. 

Investigations of present methods of gathering, handling, grading, 
packing, and shipping farm products to determine their relative 
efficiency are being carried on. Their purpose is to secure the edu- 
cation of the producer and shipper as to best methods and as to the 
value and necessity of fixed market standards and strict grading. 

In the case of perishable products every handling is conducive to 
additional deterioration, and every change of ownership or possession 
means, as a rule, added costs. It is planned to trace products from 
the time they are received in the city until they are in the hands of 



560 AGRICULTURAL ECONOMICS 

the consumer in an effort to locate the sources of waste, record the 
unnecessary changes of ownership, and also to study the work of each 
type of dealer and the cost and efficiency of his service. 

The Office has undertaken to render assistance both to individual 
producers and shippers and to associations of producers or consumers 
in difficulties relating to the transportation of farm products. As a 
rule, this assistance has been along general educational lines. The 
Office has not attempted to act specifically with carriers as agent for 
any person or association. Many communications have been sent 
in the effort to explain to shippers technical details concerning rail- 
roads and their methods. The endeavor has been to put them in a 
position to handle their business with common carriers in an intelligent 
manner. For the most part it is believed that better service is ren- 
dered the public by helping them to help themselves in such matters 
than by taking charge of the whole affair for them. Cases may arise 
however, in which it would be advisable for the Office to handle 
directly with shippers and carriers all of the details of some trans- 
action, and in such an event it will undertake to do so as a demonstra- 
tion, especially when better results can be obtained and the educational 
value of the service to shippers can thus be increased. 

Special investigations are also being undertaken concerning the 
possibilities of marketing by parcel post and express, marketing live- 
stock and meats, dairy products, and cotton and its products. In 
connection with this last project, experiments are made to determine 
the relative commercial value of pure-bred varieties of cotton and the 
percentage of moisture in cotton at the gins, compresses, and other 
concentration points. Primary market surveys are undertaken to 
determine geographical production, the quality and variety of long- 
staple cottons, and other matters. An effort is made to demonstrate 
to cotton growers the advantages of organizing co-operative marketing 
societies to handle cotton in even-running commercial quantities, and 
to assist them in forming these associations. Illustrations of results 
already obtained in this work are afforded by organizations of cotton 
planters which have been formed in Arkansas and Arizona. More 
direct dealing between grower and manufacturer is promoted in order 
to reduce to a minimum injurious and unnecessary handling of cotton. 
Investigations are made of the present methods of handling, marketing, 
and utilization, and studies are carried on regarding the establishment 
of standard grades and the standardization of conditions under which 
cotton seed and its products are handled and stored. In the cotton 



MARKET METHODS AND PROBLEMS 561 

warehousing investigations, studies are being made of such subjects 
as insurance rates on cotton in storage and the results, including better 
arrangements for financing, to be derived from conserving cotton in 
storage houses; the construction of different types of warehouses; 
and the relation of present methods and practices of compressing 
cotton to warehousing. Special attention will be given to co-operative 
storage* companies with a view to aiding such organizations when 
advisable. Investigations will be made to determine the relation of 
warehouse facilities to the financing of the cotton crop and the interest 
rates on money loaned on cotton, as well as the relation of the various 
methods and practices of compressing cotton to storage capacity, 
insurance rates, and economy in handling and transportation. 

178. MARKET ORGANIZATION ON A NATIONAL SCALE 1 
By DAVID LUBIN 

The Landwirtschaf tsrat of Germany begins with the township 
organization. Every farmer who owns land has a portion of his tax 
assessment set aside for the support of the Landwirtschaftsrat. This 
gives him the right to vote for a chamber of agriculture in his town- 
ship. The township organization elects its representative to the 
county organization. The county organization elects the members to 
the state organization, and the members of the 24 state organizations 
of the German Empire elect their national Landwirtschaftsrat, con- 
sisting of 72 members. 

To begin with, the 72 members of the Landwirtschaftsrat have 
their seat in Berlin. They, in substance, have the right of initiative 
and referendum touching all laws that directly or indirectly concern 
agriculture. The imperial laws of Germany direct that the Reichstag 
must submit these laws to the Landwirtschaftsrat for its opinion. 

But this is by no means all or the most important of its functions. 
The township, county, state, and national organization is, in sub- 
stance, a semi-official information bureau for the purpose of the 
scientific marketing of agricultural products. 

The membership of this organization consists of several million 
units. Its semi-official status gives it the power to swing the dis- 
tributive end of German agriculture, and thus renders trusts in food 
products in Germany an absolute impossibility. This is an invaluable 
service not merely to the farmers but likewise to the consumers of 
Germany as well. 

1 Adapted from a hearing before the State Department, June ai, 1015. 



562 AGRICULTURAL ECONOMICS 

In my opinion, this system is the cornerstone, the secret, the 
reason of the transcendent strength, of the German Empire. Let 
us not be mistaken; the great strength of the German Empire 
does not come from the "goose step" of her soldiers nor from her 
Krupp guns; it comes as a direct and indirect result of her Landwirt- 
schaftsrat system for the scientific distribution of her agricultural 
products, of the food products of Germany, all of which is reinforced 
by her effective and efficient rural-credits system. 

I will now take up the details of the Landwirtschaftsrat and its 
adaptation in the United States. There is to be a series of organiza- 
tions of various degrees, all federated into one great organization 
semi-official in character. Like in a pyramid, it will consist, as it were, 
of different layers. Beginning with the apex there will be the national 
commission; then the wider layer below that, the state commissions; 
or the still wider layer below that, the county commissions ; with the 
widest layer at the base, the township commissions. 

There is, first of all, to be a national commission, say, of fifteen 
able representative farmers and fourteen other men not necessarily 
farmers, but leading men. Let us say that one is an eminent carrier, 
the president of a railway company; then, say, an eminent financier, 
a well-known banker; then, an eminent man having a knowledge of 
interstate-commerce relations, an Interstate Commerce Commission 
man; then, an ex-postmaster-general, say, with a knowledge of parcels 
post; and others, captains of industry, men who deal in large matters 
of business. Thus the fifteen farmers and these fourteen business men 
would compose a national commission of twenty-nine. 

This commission, say, with headquarters in Washington, would 
meet in session for a few days, say, once or twice a year, passing upon 
all measures and by-laws necessary to govern the national organiza- 
tion. Under this commission there is to be a secretary-general with 
his staff, who are to constitute the working bureau. This bureau is 
to have its headquarters in which to carry on the work the year round. 
It is this secretary, with his staff of assistants, these bureaus, who are 
to do the work. 

A similar commission to this national commission, with its secre- 
tary and working force, is to be constituted for each state in the 
Union; that would be the wider or second layer of the pyramid. 

The third and still wider layer is a similar commission for each 
county in each of the states of the Union. And, finally, the last and 
widest layer is a similar commission for each of the townships in each 



MARKET METHODS AND PROBLEMS 563 

of the counties of the state in the various states of the Union. The 
national, state, county, and township organizations, when confeder- 
ated, would consist of several million units. 

The collective organizations would properly be designated the 
"national marketing organization." Such an organization would be 
to industry and agriculture what the chambers of commerce, boards 
of trade, mercantile agencies, and clearance houses are to commerce 
and finance. Remove all these from commerce and finance and you 
will soon produce decay, failure, and revolution. All these are absent 
so far as the industry of agriculture is concerned. The proposed 
national marketing organization would supply them. 

Once put the national marketing organization in operation and 
there will be no need to grope in the dark or to guess where to sell 
and when to sell and how to sell. 

Toward this end the working bureaus could bring into play all the 
modern means of up-to-date business facilities. They could employ 
the telephone, the night-letter telegram, and card-indexing system. 
The communications could be regulated to come from the township 
to the county organization, from the county organization to the state 
organization, from the state organization to the national organization. 
The national organization could be in touch with the local markets, 
with the markets throughout the states, and with the market centers 
of the world. Each producer would thus be enabled to see, not merely 
with his own eyes, as at present, but with the help of four or five 
millions of his fellow- workers' eyes. Where now there is commercial 
ignorance and darkness, there would then be commercial knowledge 
and light. At the present time each producer's lack of knowledge 
causes him to grope around in a limited territory full of cul-de-sacs, 
but under the proposed national marketing organization the farmers 
everywhere would have the same light and intelligence in the 
commercial end of agriculture as merchants and financiers have in 
the business of commerce and finance. 

Mr. Smith: It might be contended that this system would create 
an organization so powerful as to become a dangerous political factor. 

Mr. Lubin: You would be quite right if the contemplated organi- 
zation were a government institution, but this should not be. 

Mr. Smith: You would have the proposed organization to be 
free from any governmental .action ? 

Mr. Lubin: No; not that, either. If this were a governmental 
institution it would lead to political centralization, when, presently, 



564 AGRICULTURAL ECONOMICS 

the government would become autocratic to an extent that would 
nullify its republican and democratic status. If, on the other hand, 
it were absolutely disconnected from any government influence, it 
would then not be possible to materialize itself. There would then 
be nothing to prevent any number of competing organizations from 
springing up with like powers and functions. Were such to be the 
case it would soon neutralize the power and effectiveness of all these 
organizations, the same as it does now in the United States and as it 
formerly did in Germany. 

The chief merit of the German system consists in the fact that the 
Landwirtschaftsrat is a semi-official organization. I wish to empha- 
size the word "semi-official." While the German Landwirtschaftsrat 
exists under the imperial laws of Germany, and while its operations 
must conform to those laws, there is no jurisdiction between this 
organization and any cabinet ministries of Germany. The Landwirt- 
schaftsrat, while under government law, is not a servant or adjunct 
of the government. Apart from obeying the few fundamental and 
simple by-laws inscribed on its charter by the government, it is in 
all other respects autonomous. In the place of being subject to a 
department of the government, it is, on the contrary, a critic of the 
government; in other words, it is semi-official. 

Being composed of a membership of millions of units, units com- 
posed of all political shades, there would then be no danger of wielding 
this organization as a special political party machine, not any more 
so than it would be possible to utilize politically the members of the 
chambers of commerce or boards of trade. 

Last fall I had occasion to travel around in Massachusetts in an 
automobile. On the road I saw in the fields heaps of apples on 
the ground. There was no market for the apples, anyone might take 
them, they were lying around on the ground rotting. Out in California, 
at Lodi, I had a talk with the owner of a large vineyard. He gave me 
to understand that, so far as production was concerned, thanks to the 
scientific information from the Department of Agriculture, there was 
nothing to complain of; that by skilful pruning and cultivating he 
had increased production a ton to a ton and a half an acre; but when 
asked about distribution, with regard to the sale of his wine grapes, 
that was a different story. The wine grapes from which the "vin 
ordinaire" is made are worth about $30 a ton in Italy, France, or 
Spain. They used to be worth from $30 to $40 a ton in California, 
but the organization of wine-makers, through combination, have 



MARKET METHODS AND PROBLEMS 565 

brought the price down to $25, then to $20, then to $15, then to $10, 
and just now to $7 . 50 a ton. Now, multiply these instances as they 
occur on the farms of the North, and of the South, and of the East, 
and of the West, and what are we doing ? We are squeezing out the 
life and the spirit of this nation, the better things that go to make a 
republic, that go to make a great and mighty nation. 

Were the founders of the Republic here, the fathers of the Revo- 
lution, were they to see our conduct in this respect, they would not 
hesitate to denominate this as political hypocrisy. We are simply 
selling our birthright for a mess of pottage. Before we may make 
our country a strong and enduring political entity we must make 
strong the conservative element in the United States, the producer, 
so that he may be a match, -an equal match, in the political tug of 
war with the city progressive, the consumer, the city radical. This, 
and this alone, will make a strong and enduring Republic. If we leave 
this undone, then all the warships and all the navy and all the army, 
however grand and strong, will not save the Republic. But if we 
balance equally the strength of the country conservative with the city 
progressive we make a great nation, not great in bombast, but great 
in reality. That is the secret of the strength of Germany. 

Mr. Smith: As I understand it, then, the object is to procure an 
equitable distribution of agricultural products through well-directed 
intelligence — to employ the best means for the placing of the surplus 
crops in the localities where they are needed. 

Mr. Lubin: Yes; intelligent and equitable distribution. 

Mr. Smith: I think I now understand what you mean. 



X 

TRANSPORTATION AND STORAGE FACILITIES 
AS FACTORS IN THE MARKETING 
OF FARM PRODUCTS 

Introduction 

It is a commonplace observation that American agriculture has 
been dependent at every stage of its development upon the extent 
and character of transportation facilities available at the moment. 
The Colonial tobacco planter must keep near enough to the streams 
so that he could roll his product in hogsheads to the local boat-landing. 
The pioneers of fche Ohio Valley were hard put to it to market their 
products till the early canals gave them cheap access to the eastern 
ports and consuming centers. The farmers who crossed the Missis- 
sippi soon found how thoroughly their fortunes depended upon the 
building activities and the rate-making policies of the railroads. 
Today the competition of the various agricultural regions of the 
country is not upon the basis of their ability merely to grow certain 
crops, but upon the basis of their ability to lay these goods down in a 
certain condition and with a certain cost of delivery in the markets 
of this or other countries. 

Indeed our whole industrial organization has been built up upon a 
basis of cheap transportation of agricultural products. This has made 
possible on the one hand the extreme specialization along manufactur- 
ing and industrial lines of certain countries and favored regions, and 
on the other hand a similar specialization by different agricultural 
regions in those lines of production for which they were especially 
fitted. England's industrial supremacy, at the expense of a neglected 
agriculture, would have been quite impossible except for the cheap 
transportation of food-stuffs from regions where they could be cheaply 
grown (see selection 179). The piling up of dense populations like 
that of Massachusetts or the extreme congestion of cities like New 
York are limited by the possibility of our transportation systems to 
furnish them with quick and economical contact with wide sources of 
food supply. Much of the recent talk of high cost of living and inves- 
tigation of city marketing arrangements is an expression of the fact 

566 



TRANSPORTATION AND STORAGE FACILITIES 567 

that we are already pressing against the barriers to further concentra- 
tion of population (see selection 188). At the other end of the line, 
however, we are rapidly developing possibilities for cheaper and better 
transportation of goods over even the longest distances. The improve- 
ment of country roads is by itself a thing less spectacular but probably 
not less important than the building of the Panama Canal. Better 
picking, packing, and handling of perishable products, the large-scale 
handling of the staples, the kiln-drying of corn, pre-cooling of freight 
cars, and countless other improvements are enlarging the zone and 
lowering the cost of modern transportation. Space permits the touch- 
ing of only a few of the many phases of the movement (sections B andC). 
And, just as transportation facilities serve to equalize our agricul- 
tural products in place, so storage facilities help to equalize them in 
time. Equipped with adequate warehousing arrangements, we are 
in a position to make the labor of the growing season provide with 
equal bounty for the entire year. Such facilities likewise enable the 
producer to offer his supplies at the moment when demand is immedi- 
ate and price offers are at their height. To be sure, the possibility of 
storing goods presents also the possibility of securing control of 
supplies and of exploiting this control in terms of speculative prices. 
But such control is very strictly limited in any line where production 
continues in the hands of a great body of independent operators, as 
is always the case in agriculture. These limitations are well set forth 
in selection 191. On the other hand, it is often argued that it would 
be distinctly to the farmer's financial advantage to retain control of his 
crop until consumers' demands are ready to take it, and thus secure 
whatever advantage the market presents, instead of allowing this to 
pass to the buyer or the dealer. 1 The benefits which flow from ade- 
quate warehousing may be seen in selection 192. 

A. Transportation and Prices 

179. FREIGHT COSTS AND MARKET VALUES 2 
By FRANK ANDREWS 

It is well known that goods whose value is high in proportion to 
their weight are likely to be charged higher freight rates than goods 
of relatively low value. And it is of no little interest to note that this 

1 For a vigorous statement of the opposite view see Quarterly Journal of 
Economics, August, 1916, p. 805. 

2 Adapted from Yearbook of the Department of Agriculture, iqoo, pp. 371-85. 



568 AGRICULTURAL ECONOMICS 

rule of freight traffic applies even to the cost incurred by farmers in 
hauling their products from farms to shipping points. It is estimated 
that it costs an average of 16 cents per ioo pounds to haul cotton from 
farms to shipping points, while the cost for wheat is 9 cents. The 
average distance of cotton farms from local shipping points is 1 1 . 8 
miles, the average weight of a wagonload of cotton is 1,702 pounds, 
and the average cost of hauling the load $2.76; the corresponding 
averages for wheat are 9.4 miles, 3,323 pounds, and $2.86. It is 
plain that cotton may be profitably hauled for greater distances and 
in smaller loads than wheat, since the value of an average load of the 
cotton picked in 1905 was more than $170, while a load of wheat was 
worth about $40. 

The average railway freight rate for cotton from local shipping 
points to seaports is estimated at 40 cents per 100 pounds, while the 
corresponding rate for wheat is about 20 cents. This difference in 
railway charges between these two commodities illustrates the tend- 
ency of value to influence transportation costs, and also shows one 
of the several phases of the principle of railway-rate making which is 
often described as "charging what the traffic will bear." On the 
ocean, also, freight charges for cotton are higher than those for wheat. 
The rates quoted for regular lines of steamers for carrying cotton from 
Galveston, New Orleans, and New York to Liverpool averaged during 
the year ending June 30, 1906, about 32 cents per 100 pounds, while 
the corresponding rate for wheat was only one-fourth that sum, or 
8 cents per 100 pounds. A cargo of cotton shipped from Galveston 
to Liverpool frequently contains as much as 5,500,000 pounds, and 
the value in 1905-6 of such a cargo at Galveston was not far from 
$600,000, while the same quantity of wheat would have been worth 
from $70,000 to $90,000. 

Cotton. — The cost of hauling cotton from farms in the South 
Atlantic States was found to be 13 cents per 100 pounds, while the 
average for all the cotton regions west of Georgia and the Alleghany 
Mountains was 17 cents. The difference in cost between the two 
regions was due chiefly to the difference in the average distances from 
farms to shipping points, the distance for the South Atlantic States 
being 9.6 miles, and for the South Central States 12 .7 miles. 

Taking into account the relative quantity of cotton produced in 
the region affected by each rate, the average charge to Galveston from 
local stations in Texas, Indian Territory, and Oklahoma during 1905 
was 54 cents per 100 pounds. The mean rate to New Orleans from 



TRANSPORTATION AND STORAGE FACILITIES 569 

347 stations in Mississippi, Louisiana, and Tennessee was $1 .14 per 
bale, or about 23 cents per 100 pounds. Cotton sent to Savannah 
from 738 stations in Georgia, South Carolina, Florida, and eastern 
Alabama was charged a mean rate of 41 cents per 100 pounds. Con- 
signments of cotton to New York City from local stations in the 
cotton regions may be carried all the way in freight cars or may 
be sent down to some southern port and there transferred to one of 
the lines of coasting vessels for shipment northward. The mean rate 
per 100 pounds to New York from 298 local points in Mississippi, by 
railroad routes exclusively, was 48 cents, or 25 cents more than the 
rate to New Orleans as given above, and the mean rate to New York 
from 402 stations in North and South Carolina, Georgia, and eastern 
Alabama was 65 cents by all-rail routes and 59 cents by rail-and- water 
routes. . These charges, it will be seen, are from 18 to 24 cents above 
the rates from practically the same regions to Savannah. The mean 
freight charge to New York from 700 local points among the cotton 
fields in Mississippi, North Carolina, South Carolina, Georgia, and 
eastern Alabama is taken as 54 cents per 100 pounds, the same as the 
estimated average rate from stations in Texas, Oklahoma, and 
Indian Territory down to Galveston. If the relative quantity of 
cotton exported from each port be taken into account, the average of 
the freight rates on cotton to Galveston, New Orleans, Savannah, and 
New York from local shipping points would be 40 cents per 100 pounds. 

Ocean freight charges are subject to more frequent changes than 
are railroad rates. If the vessels at a certain port have a large amount 
of available space for cargo and the quantity of goods to be shipped 
is relatively s/nall, freight rates are likely to be low. The mean of 
the published quotations for cotton to Liverpool for the first week of 
each month during the year 1905-6 was 33 cents per 100 pounds from 
New Orleans and 17 cents from New York. The rates from Galves- 
ton and other leading Gulf ports are regarded as practically the same 
as those from New Orleans. 

The average ocean rate on cotton from the United States to 
Liverpool for the year 1905-6 was about 32 cents per 100 pounds, 
excluding terminal charges, the same as the annual mean oi the 
quoted rates from Savannah to the United Kingdom. It will be 
noted also that the average railway rate from. all local points to all 
ports, as estimated above, was 40 cents, while the charge from local 
points to Savannah was 41 cents per 100 pounds. In regard to both 
land and water rates Savannah occupies a medium position. 



570 AGRICULTURAL ECONOMICS 

The sum of the cost per ioo pounds for transporting cotton on 
country roads, on United States railroads, and across the Atlantic, as 
estimated above, is 88 cents, and, with an allowance of 2 cents for 
transfer to ship at some United States ports, the entire cost of carrying 
may be taken as 90 cents per 100 pounds. 

The mean price of cotton in England for the twelve months ending 
June 30, 1906, was about 12 cents per pound; the annual mean of the 
cash prices for Upland middling cotton at this market at the close of 
each business day for the year mentioned was 12 . 1 cents. The mean 
of the daily closing prices for Upland middling cotton at the four 
leading export cities of the United States for the same year was 11 
cents. The difference in price between the four leading cotton ports 
of the United States and Liverpool was, therefore, 1 . 1 cents per 
pound, while the cost of carrying the cotton across the ocean was 
about one-third of 1 cent per pound, leaving two-thirds of 1 cent for 
profits and other items, such as insurance, selling commissions, and 
cartage. The total cost of transportation from United States farms' 
to Liverpool, including cost of transfer to ships at United States ports, 
was about 7 . 5 per cent of the value of the cotton in that city. A 
summary of the transportation costs for cotton mentioned in the pre- 
ceding paragraphs is given below: 

p Cents per 

From 100 Pounds 

Farms in 555 cotton-producing counties, by wagon, to local ship- 
ping points 16 

200 local points in Texas, Indian Territory, and Oklahoma, by all- 
rail routes, to Galveston 54 

347 local points in Mississippi, Louisiana, and Tennessee, by all- 
rail routes to New Orleans 23 

738 local points in Georgia, South Carolina, Florida, and eastern 

Alabama, by all-rail routes, to Savannah 41 

298 local points in Mississippi, by all-rail routes, to New York. . . 48 
402 local points in North Carolina, South Carolina, Georgia, and 
eastern Alabama 

By all-rail routes to New York 65 

By rail- and- water routes to New York 59 

Local shipping points to seaports, average for United States .... 40 
Gulf ports and New York, by regular steamship lines, to Liverpool 32 

Savannah, by chartered vessels, to the United Kingdom 32 

United States to United Kingdom, average for all ports 32 

Wheat. — The average farm value of wheat in the United States 
on December 1, 1905, was 74.8 cents per bushel, and the average cost 



TRANSPORTATION AND STORAGE FACILITIES 571 

to the farmers of delivering this wheat at 9 cents per 100 pounds is 
5 .4 cents per bushel. Hence the actual value on the farm would be 
69.4 cents per bushel. The mean of the railway freight rates on 
wheat from 562 local stations in Illinois and Nebraska to Chicago in 
1905-6 was 16 cents per 100 pounds, the same as the mean rate to 
Minneapolis from 311 local stations in Minnesota, North Dakota, 
South Dakota, and Nebraska. To Kansas City, from 456 stations 
in Kansas, Missouri, and Oklahoma, the mean rate is found to be 
about 14 cents per 100 pounds. Making allowances for the relative 
quantities of wheat received at each of these three primary markets 
during the year 1905-6, the average rate on wheat from local shipping 
points to primary markets in 1905-6 was 15 .5 cents per 100 pounds, 
which, added to the average cost of hauling wheat from farms in the 
North Central States, makes a total cost of transportation of 24.5 
cents per 100 pounds, or 14.7 cents per bushel from farm to primary 
market. 

The average of the prices for No. 2 red winter wheat at Chicago, 
No. 1 northern wheat at Minneapolis, and No. 2 hard wheat at Kansas 
City, allowing for the relative importance of each price in proportion 
to the quantity of wheat received at each market, is 85.1 cents per 
bushel, and the average farm value, including cost of hauling, of the 
crop in the states and territory named was 80.7 cents. The average 
freight rate being 9.3 cents, the average value on December 1, 1905, 
at the three primary markets for all marketable grades of the wheat of 
this region would be probably not more than 82 cents. This would 
make only 3 . 1 cents difference between the average value of all wheat 
and the price of three of the better grades. 

From the interior wheat markets to the seaboard there are two 
general routes, one eastward to Atlantic ports and the other leading 
south to the Gulf of Mexico. Along the eastward routes the railroads 
have to share their traffic with the waterways formed by the Great 
Lakes and the connecting rivers and canals. The Mississippi River 
is a potential although not always an active competitor for the traffic 
from' the wheat regions to New Orleans. During 1904 and 1905 
practically no wheat was carried by river from St. Louis to New 
Orleans. 

The freight charge from Chicago to New York or Boston for 
wheat intended for export was 15 cents per 100 pounds in 1905-6, by 
all-rail routes. The lake-and-rail rate from Chicago to New York 
ranged between 5 .75 and 7 .50 cents per bushel. Shipments by way 



572 AGRICULTURAL ECONOMICS 

of the lakes and Erie Canal were sent at still lower rates. During the 
calendar year 1905 the mean rate by lake and canal to New York" 
from Chicago was 5 . 53 cents per bushel, by lake and rail the rate was 
6.40 cents, and the railroads charged 9.90 cents for carrying the 
wheat the entire distance. The all-rail rate from Chicago to Balti- 
more and Norfolk was 3 cents per 100 pounds less than the rate to 
New York or Boston and 1 cent below the charge to Philadelphia, on 
exported wheat. The mean all-rail rate on exported wheat from 
Chicago to the Atlantic seaboard may be taken as about 13 cents 
per 100 pounds, or 7.8 cents per bushel. On wheat intended for 
domestic consumption the rate to Boston from Chicago was 4.5 cents 
per 100 pounds above the export rate, and the mean rate on domestic 
wheat from Chicago to Boston, New York, Philadelphia, Baltimore, 
and Norfolk exceeded the mean export rate by 3 cents per 100 pounds, 
or 1 .8 cents per bushel." 

The average rate on wheat from local points in the interior to the 
Atlantic and Gulf coasts is less than the sum of the charge from those 
points to primary markets plus the charge from these markets to the 
seaboard. The mean rate from local stations in the wheat region east 
of the Rocky Mountains to the Atlantic seaboard is taken as 13.4 
cents per bushel, which is the mean rate from Kansas City and Omaha 
to that coast, and the rate to the Gulf as 10 .8 cents, the same as from 
Kansas City to New Orleans and Galveston. The average rate from 
local shipping points to both coasts, allowing for the relative quantity 
of wheat exported from each, would be 12.6 cents per bushel. 

Ocean rates were higher than usual during the year 1905-6, and 
the mean charge for carrying wheat by regular steamship lines to 
Liverpool from New York, a distance of about 3,100 miles, was 
3 . 8 cents per bushel, or 1 . 6 cents less than it cost a farmer to haul 
the wheat 9 .4 miles from his farm to a neighboring railroad station. 
Sometimes the rate on wheat from an Atlantic port in the United 
States to Liverpool is as low as 1 .5 cents per bushel, or 3 .9 cents less 
than the average cost of hauling from the farms. The average of the 
rates on wheat to Liverpool by regular lines from New Orleans and 
New York and by chartered vessels from Baltimore, not including 
costs of transfer, may be taken as 4 . 8 cents per bushel, or o . 6 cent 
less than the cost of hauling in wagons from farms to shipping points. 

The mean price at Liverpool for "No. 2 red winter" wheat for 
five months ending June 30, 1906, the season when this grade was 
most frequently quoted there, was 92.6 cents per bushel, and the 



TRANSPORTATION AND STORAGE FACILITIES 573 

cost of transportation to Liverpool from local points in the Middle 
West is estimated at 17.4 cents per bushel. Deducting this freight 
charge from the price just quoted, and allowing 1 . 5 cents for profits 
and minor costs, the value of this quality of wheat at local shipping 
points in Illinois, Minnesota, Missouri, North Dakota, South Dakota, 
Nebraska, Kansas, and Oklahoma would be 73 .7 cents, or only 2 .9 
cents per bushel above the average value of all wheat at those points. 
The value of wheat sent to Liverpool in 1905-6 and the freight 
costs along the way, expressed in averages applying to the United 
States as a whole, were: 



Cents per 
Bushel 



Value on farms in United States before hauling 69 

Cost of hauling to local shipping points 5 



Average farm value, including cost of hauling 74 

Railway freight charges from local points to seaport . . 11 

Ocean freight charges to United Kingdom 9 

Minor costs of sale and shipment 1 



97-5 
In the United Kingdom, where a large part of the wheat consumed 
is imported, the cost of ocean transportation is an important matter. 
During the calendar year 1905 the wheat, not including flour, imported 
into that country amounted to 182,000,000 bushels and the average 
cost of ocean freight was about 9 cents per bushel, thus making the 
total cost of carrying it on sea more than $16,000,000. The mean 
annual rates on wheat from the various exporting regions to the 
United Kingdom for 1905 are as follows: 

t?™™ Cents per 

From Bushel 

Canada 4 

United States, Atlantic and Gulf ports 5 

Russia, Black Sea ports 7 

Roumania 7 

British India 9 

Argentina 11 

Australia 14 

United States, Pacific ports 17 

Average 9 

The effect of applying to wheat the same rates as are charged 
some other articles in ocean traffic would be alarming to the British 



574 AGRICULTURAL ECONOMICS 

people and to all other nations which receive an important part of 
their wheat supply from over the sea; and the readjustment of prices 
brought about by such changes in transportation costs might have 
serious results for the agricultural interests in many countries of 
supply. If the average cost of carrying cotton the 3,000 or 4,000 
miles from United States Atlantic and Gulf coasts to the United 
Kingdom were applied to transportation of wheat over the routes 
mentioned above, ranging in length from 3,000 to 15,000 miles, the 
rate per bushel would be 19 cents instead of 9, and the margin between 
prices in England and in countries of supply would average 10 cents 
per bushel more than in 1905. 

180. TRANSPORTATION RATES AND CANTALOUPE PRICES 1 
By WELLS A. SHERMAN 2 

The daily receipts of car lots of cantaloupes naturally play an 
important part in determining prices. On the average large market, 
these receipts, are from several widely separated producing sections. 
Cantaloupes from California were on the New York market with those 
from Maryland; a section distant more than 3,000 miles competing 
with a shipping area only some 200 miles away. On August 15, 
Texas points, 2,100 to 2,200 miles distant from New York City, were 
sending their melons to compete with those from New Jersey. New 
Mexico and Nevada compete with Indiana and Illinois for preference 
on the Chicago market. A good example of the competition between 
different producing areas is shown by the conditions on August 15 in 
the city of Chicago, when the melons from eight different states were 
quoted as being in direct competition with each other. It is interest- 
ing to note the wide area represented with Michigan in the North, 
Texas in the Southwest, California in the West, and Delaware and 
Maryland in the East. 

There are important reasons why competition from such widely 
separated areas is possible. Transportation and refrigeration facilities 
are such that it is now possible to deliver these shipments from distant 
points to eastern markets in practically as sound condition as that in 
which local supplies arrive. The question of competition narrows 
itself to a comparison of appearance and quality of the melons and 
the difference in freight and refrigeration rates from these competing 

1 Adapted from Bulletin 315, United States Department of Agriculture, pp. 3-6. 

2 A. Dexter Gail, Jr., and Faith L. Yeaw, collaborators. 



TRANSPORTATION AND STORAGE FACILITIES 



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576 AGRICULTURAL ECONOMICS 

areas. If the melons from California and Texas are not superior in 
some way to those from Delaware, Maryland, and Michigan, then they 
cannot profitably enter the same market, unless the cost of production 
is sufficiently low to offset the increased freight and refrigeration 
charges. 

A close study of the larger markets leaves no doubt that in a 
general way higher prices are paid for cantaloupes grown under irriga- 
tion than for those grown under rainfall. While the latter may be 
of equal quality at times, the quality varies more from week to week 
with changes in temperature, rainfall, and sunshine at the point of 
origin. If irrigation is controlled properly, the western cantaloupes 
never He on wet ground, and are almost entirely free from the unat- 
tractive white side which characterizes most of those grown under 
rainfall, especially in very wet seasons. 

Table II gives the car-lot rates for freight and refrigeration from 
several well-known cantaloupe shipping sections to 12 of the large 
markets in the East and Middle West. 

In the immediate vicinity of many important markets a large 
acreage of cantaloupes is planted annually. These cantaloupes can 
be placed on the home market at a minimum of expense as there are 
no heavy freight and refrigeration charges to pay and in some cases 
the packages are returned to the grower. The saving in transporta- 
tion charges is considerable, as indicated in Table II. In addition 
to this, the local growers have the great advantage of being able to 
offer dealers a daily supply of freshly picked melons. In many cases, 
in 1 9 14, it was possible to dispose profitably of a local crop at prices 
which would not return the distant car-lot shipper his cost of trans- 
portation. 

181. ENLARGING THE ZONE OF THE CITY'S MILK SUPPLY 1 
By EUGENE MERRITT 

In 1842, when the Erie Railroad was under construction, one of 
the New York City milkmen began to ship milk from Orange County. 
This milk proved to be of such good quality that the traffic spread 
rapidly. In a few years the Harlem division of the New York Central 
began to haul milk from the counties on the west bank of the Hudson 
River. At the same time the Newburgh, Dutchess, and Connecticut 
branch of the Central New England was shipping milk to New York 

1 Adapted from Bulletin 177, United States Department of Agriculture,^. 10-14. 



TRANSPORTATION AND STORAGE FACILITIES 577 

City over the Hudson River branch of the New York Central. A few 
years later the New York, New Haven & Hartford was bringing milk 
from the New England States to supply the New York market. In 
1870 the Delaware, Lackawanna & Western received small consign- 
ments of milk on its Sussex branch in New Jersey, and in the same 
year the New York, Ontario & Western started its first milk train from 
Bloomingburg, New York. Practically all of the railroads had their 
farthest point from New York within the 100-mile limit, except that 
the Harlem was bringing milk from Rutland, Vermont, a distance of 
240 miles. There was very little change in the areas from which milk 
was obtained until 1890. In that year the New York, Ontario & 
Western extended its service to Walton, New York, a distance of 179 
miles. Shortly after 1890 several other railroads started milk trains. 
The Lehigh Valley established this service with Dryden, New York, 
as a terminus. In 1893 the Delaware & Hudson was receiving milk 
and forwarding it to New York City over the Delaware, Lackawanna 
& Western. In 1890 the West Shore extended its service beyond 
Albany, with Syracuse as a starting-point, and two years later the 
Hudson River branch of the New York Central extended its service 
to the same point. By 19 10 many of the points from which milk was 
shipped to New York City were over 300 miles distant. There were 
no new railroads to enter this service, but those already carrying milk 
had extended their lines so that it was bounded by the Canadian 
boundary line on the north and within a short distance of Buffalo on 
the west. 

Prior to 1870 all of the milk consumed in Boston came from a 
distance or^riot more than 65 miles. By 19 10 this had been extended 
to 210 miles, thus tapping regions from which milk is shipped to New 
York City also. Philadelphia, likewise, has been enabled by railroad 
shipping facilities to draw its milk supply from as far west and north 
as New York state within a few miles of Buffalo. 

B. Improving Methods of Handling Farm Products 

182. THE LOSS DUE TO BAD METHODS OF HANDLING EGGS 1 
By M. E. PENNINGTON and H. C. PIERCE 

Let us see what sorts of eggs are found in our markets. Here arc 
rotten eggs, broken eggs, cracked eggs, dirty eggs, and stale, shrunken 
eggs, and last — unfortunately many times least also are the fresh. 

1 Adapted from Yearbook of the Department of Agriculture, 1010. pp. 463-76. 



578 AGRICULTURAL ECONOMICS 

sound, clean eggs, which the market calls "firsts." What causes con- 
tribute to this list of undesirable and loss-producing grades ? Three 
causes mainly: (i) climatic conditions, (2) careless or deliberately 
bad marketing, (3) poor care of the poultry on the farm. The egg 
must be kept cool at every stage of its handling if it is to retain a 
maximum of freshness when it reaches the consumer. This is not a 
simple matter, even when one considers the great progress made in 
the extension of artificial refrigeration throughout the country. 
Refrigeration in cars and warehouses, chilled rooms at the commission 
man's, and the retailer's icebox are, with fair rapidity, making possible 
a system of handling that will surmount temperature difficulties, pro- 
vided the eggs are delivered to the first refrigerator in good condition. 
No amount of refrigeration or care will undo the damage done by a 
few hours of summer sun or a few days in a hot room. Indeed, after 
deterioration has begun, refrigeration is unable to check those pro- 
cesses completely. 

The first responsibility for low quality of market eggs is found to 
rest upon the farmer, and after him come the country produce dealer 
or storekeeper and the shipper who does not have artificial refrigera- 
tion. Usually the farmer gathers his eggs daily, or he may gather 
them at irregular intervals. Stolen nests often accumulate a large 
lay, over a period of some weeks, and may have been covered by 
brooding hens for a while, to boot, before the farmer happens to find 
them; but the chances are that every sound-shelled egg goes to 
market, regardless of the condition inside the shell. If the eggs are 
gathered with fair regularity, how are they kept while orrthe farm ? 
Generally where the housewife can most conveniently gex them for 
household use, not where the temperature is low and the air fresh. 
Neither does the farmer have any regular time for taking this stock 
of eggs to market. In the spring, when they are most plentiful and 
the market is falling, he is apt to go weekly or the egg peddler calls 
at the farm. When hot weather comes and the lay falls off he waits 
for a larger number or is too busy with "crops" to drive to town. 
Meanwhile shrinking and incubation are going on rapidly, and, as a 
last insult to the hen which laid a perfectly fresh egg, he often goes 
to the market with an umbrella over himself, but the basket or box 
of eggs is exposed to the summer sun, a heat which is often no degrees 
Fahrenheit and may be 10 degrees above that. In the autumn, with 
a still smaller lay and a rising market, he holds eggs for high winter 
prices. The conditions under which he keeps them are not conducive 



TRANSPORTATION AND STORAGE FACILITIES 



579 



to good preservation, and the time is inordinately long. Is it any 
wonder, with such conditions prevalent on the farm, that studies made 
in one of the typical western egg-producing states during the candling 
season showed the following losses on delivery to the packer ? 



PERCENTAGE OF EGGS CONSTITUTING A TOTAL 
LOSS AT PACKING HOUSE 



Month 


No. of 
Shippers 


Percentage of 

Rots or Other 

Total Loss 


No. of Dozens 
Examined 


June, two weeks .... 
July 


12 

19 
16 

9 

5 

2 


3.10 
2.79 

3-43 
403 

4-47 
8-33 


5,430 
13,740 
9,270 
2,970 
I,llO 


August 


September 

October 


November 


210 


Mean 




4-36 




Total 




32,730 









The figures in this table give only those eggs which are a total 
loss. No mention has been made of the stale eggs, dirty eggs, blood 
rings, and other sources of partial loss. Note that the greatest num- 
ber of eggs totally lost is in November, when prices to the farmer are 
very high. In further confirmation of this fact are some investiga- 
tions of the quality of eggs brought to the country storekeepers during 
October, showing that only 25 per cent would rank as "first" on the 
Chicago markets, 60 per cent were "seconds," owing to long holding, 
5 per cent were cracked, and 4 per cent were rotten or stuck to the 
shell from long holding. Some of the farmers at this time had held 
eggs for four weeks. 

The country merchant handles eggs as a by-product, taking them 
in exchange for merchandise. He makes his profit on the merchandise 
taken in trade, not on the eggs, frequently giving an inflated price for 
them to hold the trade of the desired customer. He, too, is more apt 
to be careless than careful of them while they are in his possession, 
storing them in hot or damp quarters and holding them for high prices 
when production is low. 

The country merchant and peddler buy eggs "case count," rather 
than "loss off." Buying "case count" means that a uniform price 
is paid per dozen, irrespective of the quality of the eggs. Rots bring 
just as much as good eggs. Buying "loss off" means that the eggs 
are candled before payment is made and rotten and broken eggs 



580 AGRICULTURAL ECONOMICS 

returned to the farmer. Occasionally a difference is made between 
first and second quality eggs. 

The farmer usually delivers the eggs to the storekeeper or packer's 
agent by wagon. From these receivers they commonly go to a central 
shipping plant, which is generally known as a ''packing house," and 
which handles goods in car lots. This plant may or may not be pro- 
vided with the proper facilities for doing the work assigned it. To 
get to the packer, however, the eggs generally go by train and in com- 
paratively small quantities, therefore, as "less than car lots," or what 
is known to the railroad men as "l.cl.'s." For such small lots or 
for short hauls the goods are picked up by a local freight. The wait 
at the station, which is frequently only an open platform on which the 
cases remain until the arrival of the train, is ruinous to quality when 
the weather is warm. 

The haul in the "pick up" freight car, the temperature of which 
is governed entirely by atmospheric conditions, results in rapid 
deterioration in summer and oftentimes freezing in winter. 

The progressive packer, who generally handles poultry, eggs, and 
butter, is now equipped with an artificially refrigerated chillroom 
which maintains a temperature of 40 degrees or a little less. If he is 
wise he rushes the eggs in cases into that room, stacks them loosely, 
and chills thoroughly before shipping to his own market center. He 
also candles in a room which is chilled, removing rotten eggs and 
broken eggs and grading according to cleanliness, size, and, to a cer- 
tain extent, freshness. After the packer has graded and repacked the 
eggs in boxes holding 30 dozen each, with clean "fillers" — as the 
little strawboard racks which hold the eggs are called — he ships them 
to the market center, generally in car lots. This gives him a chance 
to control the temperature of the car, keeping it iced in summer 
or closing it to prevent freezing if the weather in transit happens to 
be cold. 

It is not a difficult matter for the transportation systems to keep 
egg cars cool enough in summer to insure quality, provided the eggs 
are good when they are put aboard the car. But breakage during the 
transit is a serious matter. Freight cars are shunted from siding to 
siding; air brakes come down hard and the long train jars from 
engine to caboose, and flying switches may occur while the cars are 
moving rapidly. These are hard knocks for an eggshell to withstand. 
Various devices have been and are constantly being tried by the rail- 
roads to prevent the shifting of loads, but the breakage of eggs in 



TRANSPORTATION AND STORAGE FACILITIES 581 

transit is still discouragingly high to the shipper who loses stock, 
the railroads which pay claims, and the consumer who ultimately 
foots the bill for both. 

It costs just the same amount to collect, pack, ship, grade, and 
market a stale, dirty, or otherwise low-quality egg as it costs to per- 
form a like service for a high-grade egg, though the former must sell 
for a lower price, and the five millions of rotten eggs that get to New 
York in a year represent just as much of an outlay of money as is 
expended on the five million dozens of good eggs. The wholesaler, 
who weeds out the rotten eggs, spreads the loss over the rest of the 
eggs in the lot, and the price to the retailer goes up accordingly. 
Then the retailer increases his price to the consumer, and the con- 
sumer being the last on the list, pays the price and wonders why 
trie cost of living has increased. 

What can we do to prevent egg deterioration all along the line, and 
thereby give the consumer a better product and increase its value to 
the industry ? 

First, the farmer must learn to select good breeds of chickens and 
take more care of them, that eggs may be larger, cleaner, and more 
plentiful on the farm. He should also kill off all the mature cocks as 
soon as the brooding season is over. The education of which the 
farmer is in need in the gathering and care of eggs after they are laid, 
and the prompt delivery of them to the next person in the marketing 
chain, is self-evident from the recital of the farmer's present methods. 

The country storekeepers and small produce buyers are, next to 
the farmer, responsible for the number of low-grade eggs marketed. 
They must be taught to buy "loss off" instead of "case count." 
Buying "case count" places the good farmer and the poor farmer on 
the same basis, and is grossly unfair to the good farmer. The pro- 
ducer of good eggs receives less and the producer of bad eggs more than 
they are worth. What incentive is there, on this basis, for the farmer 
to take extra trouble and care? 

Another bad habit which is gaining in the countryside is the Saving 
at the farm by the packer or merchant of carriers holding 30 dozen. 
The farmer waits until the case is full before marketing. This is not 
objectionable when the flock is large or production rapid, but out of 
season or on the small place it means three or four weeks' holding to 
get a full 30-dozen box. The shipper can materially improve the 
quality of eggs in the market if he buy by quality —not simply by 
count. He will also improve his business. 



582 AGRICULTURAL ECONOMICS 

The packer, too, must have artificially refrigerated rooms for 
handling and holding eggs. Indeed, it seems likely that, as the egg 
and poultry industry develops, and we must give more attention to 
the saving of the garnered foodstuffs, there will be numerous receiving 
stations throughout the country, easy of access and artificially 
refrigerated, that perishable products in general may be economically 
handled at the source of production. 

The source of production. — There is the starting-point for most of 
the trouble in the handling of perishable produce, be it southern 
cotton mishandled in the field before it is baled, or western corn that 
is not well dried before it goes to the elevator, or eggs that are heated 
or soiled or cracked on the farm. Not all the trouble is at the starting- 
place, of course. Good handling must be everywhere from the pro- 
ducer to the consumer if the maximum of quality and minimum of 
loss are to be maintained. But even perfection of handling at the 
market center cannot compensate for bad treatment at the source 
of supply. 

183. THE INFLUENCE OF REFRIGERATED CARS AND STEAM- 
BOATS ON THE FRUIT INDUSTRY 1 

By WILLIAM A. TAYLOR 

The rapid development of commercial fruit culture has been one 
of the remarkable features of the agricultural progress of the world 
in the century just closed. From the position of an insignificant 
industry at the beginning of the century it has risen to commanding 
importance in many countries, and in some has become the dominant 
feature of agriculture. Outside of the wine-producing regions of the 
Old World there was comparatively little commercial fruit culture a 
hundred years ago except in specially favored localities and for the 
supply of local needs. In a few localities there was a considerable 
production of fruit for sun drying, as in the prune districts of France 
and the raisin districts of Spain and other Mediterranean countries. 
Oranges and lemons were marketed to some extent from Sicily and 
Spain in the ports of Western Europe, and occasional small lots found 
their way across the Atlantic to the seaboard cities of America, but 
without sufficient regularity to develop more than a speculative and 
haphazard trade in fruits. It seems hardly possible that no longer 
ago than 187 1 there were but a half-dozen fruiterers in London, now 

1 Adapted from Yearbook of the Department of Agriculture, 1900, pp. 561-78. 



TRANSPORTATION AND STORAGE FACILITIES 583 

the greatest fruit market in the world, and that oranges and lemons 
at that time constituted almost their sole stock in trade, aside from 
home-grown fruits in their season. Yet this is asserted by one of the 
veteran dealers of the city to have been the case when he began busi- 
ness in that year. 

Soil and climatic conditions were the same then as now, and 
regions in the Old World to which the more important fruits were 
adapted were fairly well defined; choice varieties had been developed 
also, including many of those that are now the leaders in our markets. 
The one thing lacking was rapid and regular transportation. As 
steam was applied to navigation and to railroading during the second 
third of the century, orchards and vineyards expanded. Under the 
influence of improved shipping facilities on both sea and land, the 
market broadened rapidly and the fruit trade gradually took on 
definite form, and was recognized as a legitimate branch of commerce. 

As railroads penetrated the interior of America and Australia, new 
and fertile regions, blessed with a genial climate, became accessible, 
and the areas devoted to fruit culture rapidly increased. The story 
of its development in California, after American occupation, is too 
familiar to need repetition, and is perhaps the most conspicuous 
example of the rapid development of a horticultural industry in the 
history of the world. 

This activity, though more noticeable in the newer continents, 
was by no means confined to them, marked development of orchard 
interests having occurred during the same period in England, and in 
France, Spain, Italy, and other Mediterranean countries. More 
recently this development extended to Tasmania, New Zealand, and 
South Africa. 

The stimulus to planting afforded by the improved facilities for 
transportation, however, soon resulted in disastrous effects of over- 
production in some sections. Large orchards, vineyards, and small- 
fruit plantations were planted farther from their prospective markets 
than their products could be transported. This was notably true in 
the Southern United States, where the added incentive of high prices 
for early fruits in markets farther north caused large plantings of the 
more perishable fruits, such as strawberries, blackberries, raspberries, 
peaches, and plums. The planters demonstrated that they could 
produce these fruits in large quantity and of high quality at a rela- 
tively low price, but the product could not, with the then existing 
facilities, be delivered to the distant consumer, for whom it was 



584 AGRICULTURAL ECONOMICS 

intended, in sound and wholesome condition. Thus, the truckers 
near Norfolk, Virginia, demonstrated as early as i860 that the straw- 
berry could be grown in large quantities and ripened long in advance 
of the northern crop. But, as repeated shipments spoiled in transit, 
its culture was abandoned until the development of more durable 
varieties and improved transportation brought the New York market 
within reach of the growers. The early peach industry of South 
Carolina and Georgia suffered a similar experience about 1850-70, 
and practically ceased to exist for a period of fifteen to twenty years; 
then suddenly, with the origination of a variety (Alberta) better 
adapted to long shipment, and the development of a car service ade- 
quate for fruit transportation, that region sprang into a leading place 
among the peach-producing sections of the country. 

The great bulk of rail shipments in the early days went to the 
market in freight cars, but it was soon found that serious losses from 
deterioration in transit were too frequent and too large to leave a 
profit to the shipper. Ventilated cars of various kinds were tried 
with varying success, the first carload shipments of deciduous fresh 
fruits from California, consisting of 33 tons of pears, apples, grapes, 
and plums, having been successfully made in them in 1869. All ship- 
ments from California prior to 1888 were thus made, carefully selected 
foothill fruit enduring the journey to Chicago, or even farther east, 
where the trains were moved on express schedule. Valley fruits 
and those from irrigated lands, however, could not be safely 
shipped. 

The results were quite uncertain, and the outlook discouraging 
until about 1887, when F. A. Thomas, of Chicago, entered the field 
with Mr. Earle and revolutionized the business of fruit transportation. 
His plan was to provide a through service from shipping point to 
destination in special cars under one management, re-icing the cars 
in transit as found necessary. It was, in short, the establishment of 
a private car line for fruit transportation, to be operated on a plan 
similar to that under which sleeping cars had long been run in the 
passenger service. He commenced operations with a few cars in 
western Tennessee in the spring of 1887, operating first on straw- 
berries destined for the Chicago markets. Owing to the distrust of 
shippers in regard to the effect of ice upon the fruit he was compelled 
to buy fruit with which to fill them for shipment. A few tests 
demonstrated the practicality of the system, however, and the new 
service became popular. 



TRANSPORTATION AND STORAGE FACILITIES 585 

Development after that was rapid. From a total of sixty cars in 
service in 1888, the company which Mr. Thomas organized increased 
its facilities, until by 1891 it had in use over six hundred cars. These 
traveled over various railroads as needed, being used for Florida fruit 
in winter and Louisiana and Mississippi strawberries in spring, gradu- 
ally working out northward as the season progressed, with long trips 
out to the Pacific Coast in July, August, and September. Their use- 
fulness did not cease with the approach of winter, for they protected 
their contents against a considerable degree of cold, and when heated 
could safely be used in severe cold weather. 

The larger plantings, stimulated by the refrigerator-car service, 
soon made possible the loading of cars at a single shipping point or 
at a few along the line of road, so that small growers now have the 
same advantage as large shippers except in the matter of car -lot 
rates. 

In recent years the business of operating cars has been taken up 
by many lines, so that there are now probably fifty or more different 
private car lines in service of various kinds, in addition to similar cars 
operated by many of the railroads that traverse fruit-producing 
regions. The fruit is in many sections loaded from the packing house, 
where it is protected from the heat of the sun, directly into the cold 
refrigerator car, from which it is not removed until it reaches its desti- 
nation, 1,000, 2,000, or 3,000 miles away. From the important fruit 
sections these cars are moved in solid trains to the principal markets. 
Capacious icing stations established at intervals along the main routes 
of travel permit re-icing of the cars with the utmost dispatch. 

Official statistics of the number of refrigerator cars in service are 
lacking, owing to the failure of some of the car lines to report the 
number of cars owned and operated by them. A careful estimate by 
the manager of the Railway Equipment Register in March, 1901, indi- 
cates that there were at that time about sixty thousand cars in service 
in the United States, Canada, and Mexico. 

No basis exists for estimating the total volume of produce handled 
by these cars, but it is very large. Leading shippers estimate that 
95 per cent of the California deciduous fresh fruits are now handled 
in them, and the proportion from other sections is steadily growing. 
Small-fruit and orchard areas in the more remote regions adapted to 
fruit culture are steadily growing under the influence of this sen- ice. 
and the producers are enabled profitably to diversify their production 
as never before. 



586 , AGRICULTURAL ECONOMICS 

As would be expected, the early efforts in fruit refrigeration on the 
ocean were made in connection with the export trade in ice from the 
New England states early in the last century. This trade carried 
American apples literally "on ice," first to the West Indies, later to 
the more important tropical maritime cities of the globe, including 
those of India, China, and Australia. It never attained large pro- 
portions, however, owing to the excessive prices at which fruit thus 
transported must be sold to yield profit to the shipper. 

Shipments of fruit in mechanical refrigeration on steamers do not 
appear to have been made until after the Australian meat trade, 
which began in 1880, was well established. 

The trade is yet limited to apples, pears, oranges, though some 
shipments of grapes have gone through in sound condition. In this 
connection it should be noted that in 1893, at the Columbian Exposi- 
tion at Chicago, the New South Wales exhibit contained a collection 
of ten varieties of apples, together with oranges and lemons, for- 
warded to Chicago in two lots, one via San Francisco, which was 
fifty-two days in transit, and the other via New York, which was 
several days longer. These exhibits demonstrated in a manner most 
convincing the usefulness and the possibilities of refrigeration in fruit 
forwarding as developed in Australia. 

In the spring of 1892 experimental carload lots of tomatoes from 
Florida were shipped to England. Later in the season five shipments 
of California peaches, pears, and plums, aggregating twenty-four car- 
loads of 20,000 pounds each, were forwarded to Liverpool from New 
York. These shipments were made in refrigerated compartments 
containing four or five carloads each, the latter quantity being required 
to fill a compartment. The departure of the fruit from California was 
timed to correspond with the sailing date of the ship for which it was 
destined, and the total time from shipping point to Liverpool and 
London was seventeen to eighteen days. The gross sales of the 
twenty-four carloads amounted to about $32,000, but the heavy 
expense of forwarding by this method left no profit to the shippers. 
With a good deal of fluctuation, these export shipments of summer 
fruits have continued from year to year, however, and they show a 
gradual growth. Longer experience in handling has made it possible 
to deliver peaches, pears, and plums from California in London in 
sound condition, almost without failure. The uncertain question from 
the commercial standpoint now is the condition of the market on 
# arrival . If bare of English and French fruits, prices sufficiently high 



TRANSPORTATION AND STORAGE FACILITIES 587 

to leave a profit are obtained, otherwise not. With lower ocean 
transportation and refrigeration rates a considerable increase could 
be made with profit, as the fruit can now be placed on the London 
market within fifteen to seventeen days from the tree in California. 

184. LOWERING THE COST OF TEAM HAULING 1 
By FRANK ANDREWS 

An inquiry just completed by the Bureau of Crop Estimates shows 
an average distance from market of 6.5 miles for the farms of the 
United States, while those farthest away from market (excluding of 
course the rarer instances) average 8.7 miles. It requires about 
one-half day for the average farmer to make a round trip with wagon 
from farm to market and back, and averages nearly two-thirds of a 
day for the farmers who are farthest from market. The figures by 
states show that the longer hauls are generally in the cotton states 
and in the Rocky Mountain region. 

In 1906 a similar investigation was made. Those figures are not 
strictly comparable with those for 191 5, but it is evident that wagon 
hauls are shorter than they were nine years ago. In 1906 the average 
haul from farm to shipping point was, for wheat, 9 . 4 miles; corn, 7.4; 
oats, 7.3; potatoes, 8.2; and cotton, 1 1 . 8 miles ; each of these staple 
crops was hauled a longer distance in 1906 than the general average 
haul in 19 15 (6.5 miles). It is noted also that the average number of 
round trips per day for all farm-to-market hauls was 2 . 1 in 191 5. In 
1906 the average number of round trips per day for hauling wheat 
was 1.2; for corn, 1.7; and for cotton, 1 . o. 

Railroad building during the past nine years has brought some 
farms nearer to shipping points and markets, and has helped to 
shorten the average distance hauled and to increase the average 
number of trips per day. During the seven years following 1906 
more than 32,000 miles of new railroad were built, and several thou- 
sand more miles have been added since 19 13, so that there are at least 
15 per cent more miles of steam railroads in the United States now 
than in 1906. In addition to this new mileage of steam railroads, the 
hauls of some farmers have no doubt been shortened by new freight- 
carrying electric railroads. 

The time required in hauling is an element in the cost of producing 
and marketing crops. From the farmer's point of view it is an element 

1 Adapted from "The Agricultural Outlook, April 23, 1915," Fanners' Bulle- 
tin 672 , pp. 11-13. 



588 AGRICULTURAL ECONOMICS 

in the cost of production. The improvement of wagon roads during 
the past nine years has probably helped to increase the average 
quantity of farm products moved by a day's wagon haul, and so to 
reduce the cost of hauling. 1 Such reduction in the cost of hauling 
constitutes a direct economic or money advantage, which follows the 
improvement of public roads in every community. Besides this 
direct advantage, certain dependent or reflex advantages also arise in 
a community where roads have been improved. The increase in the 
value of farm lands is an example of such indirect advantages. Of 
course the direct decrease in the cost of hauling and the increase in 
farm values are not entirely separate and independent. The farm 
increases in value partly because the cost of hauling is decreased. 

Whatever methods are used to improve a road, the improvement 
for hauling purposes is due to three causes — the betterment of the 
road surface, the reduction of the grade, and the shortening of the 
length. On such an improved road the time required to haul a given 
quantity of material a given distance is reduced. The reduction may 
be largely due to increased speed of hauling, to increased load, or to 
both. It is important to recognize that for transportation purposes 
reduction of time is equivalent to a decrease of the distance from the 
market centers. It is easy to see, then, why the increase of farm 
values must follow improved roads, for their effect is to bring the 
farms, in a sense, nearer the towns. The fact that on roads with 
improved surfaces hauling becomes largely independent of the season 
of the year or weather conditions means another very considerable 
reduction in hauling costs. 2 It also means that many of the limitations 
of the number and kind of farm operations are immediately removed. 

In order to fix one's ideas on the reduction in the cost of hauling 
due to the improvement of roads, the transportation of goods to the 
railroads and of farm produce to market should be considered. The 
cost of this work in the United States at present is high and is due 
mainly to steep grades and yielding road surfaces on unimproved 

1 The remainder of this reading is adapted from Farmers 1 Bulletin 503, pp. 3-10. 

2 This point might well be elaborated. If the roads are usable at all times, the 
farmer can often do hauling when his time and that of his team would otherwise 
be wasted. Likewise, he can deliver his goods to market at just the time when 
demand is strong and prices good. We talk much of the advantage the farmer 
would gain by storing on the farm instead of dumping his goods on the market 
as soon as harvested. But if the character of the roads is such that he must do 
his hauling before the rains begin in the fall or before the frost begins to come 
ut of the ground in the spring, these benefits are out of his reach. — Editor. 



TRANSPORTATION AND STORAGE FACILITIES 589 

roads. When a grade exceeds a rise of 6 feet to the hundred feet in 
horizontal measure it becomes an increasing hindrance to traffic. It 
must always be remembered that the worst grade on any road tends 
to limit the load that can pass over the entire road. 

The cost of hauling farm produce to market is probably not so 
much increased by the presence of excessive grades as it is by the bad 
conditions of road surfaces. The desirable road surface is hard and 
reasonably smooth. Almost every road is fairly hard at certain times 
in the year. Too frequently, however, at the season when it is desired 
to use the roads, the surface is soft, and the consequent tractive 
resistance is excessive and wasteful. The most frequent form of soft 
road surface is the muddy surface. Many attempts have been made 
to fix the relative weights which a horse can draw in an ordinary 
wagon over level road surfaces of various kinds, and the following 
figures are current and fairly reliable: On a muddy earth road the 
amount varies from nothing to a maximum of 800 pounds; on a 
smooth, dry earth road, from 1,000 to 2,000 pounds; on a gravel road 
in bad condition, from 1,000 to 1,600 pounds; on a gravel road in 
good condition, about 3,300 pounds; on a macadam road, from 2,000 
to 5,000 pounds; and on a brick road, from 5,000 to 8,000 pounds. 
These figures show that if the speed of travel is the same on all these 
road surfaces a horse will haul on a good macadam road from three 
to five times as many tons per mile in a day as upon a moderately 
muddy earth road. This matter may be considered in another way 
by admitting that one horse is capable of a certain fixed duty per day. 
Then, with a given load, the effective radius of travel from a given 
point on a macadam road is from three to five times the radius of 
travel from that point on a moderately muddy earth road. The 
trouble with unimproved earth roads is that they are moderately 
muddy for many months in the year. 

C. Railway Equipment and Services 

185. METHODS OF HANDLING SHIPMENTS OF FRUIT AND 

VEGETABLES 1 

By FRANK ANDREWS 

Progress in methods of hauling perishable fruits and vegetables 
is part of a general betterment of railroad service. The freight 
carried on many railroads is divided into classes, based upon the kind 

1 Adapted from Yearbook of the Department of Agriculture, 1911, pp. 107-75 



590 AGRICULTURAL ECONOMICS 

of service rendered. The highest class of goods is given the quickest 
and most regular service. A second class of goods, and even a third 
or a fourth, may also be moved in trains having regular times for 
arrival and departure, but which are slower than the " manifest,'' 
"red ball," or "vegetable express" trains. These classes are distinct 
from the classes upon which freight rates are based. 

Fresh fruits and vegetables are usually included in the list of 
commodities which are given this best service. Trains carrying these 
perishable products are run at greater rates of speed and with greater 
regularity than are ordinary freight trains. Delays are reduced to a 
minimum, and especial care is taken to have the cars carrying these 
fruits and vegetables move promptly along the way. Where the 
traffic justifies it, entire trains are made up of such produce. 

One feature of this service is the telegraphic report which is made 
of each car as it passes each reporting station on its route. These 
"passing" reports, however, are made, on some railroads, for lower 
classes of freight also. 

Some of the principal parts of this system were in use before 1885 
on at least one railroad. Cars were reported by telegraph on passing 
certain points, and their movement was recorded in the central 
office, not only in writing but by means of pegs. Each car was repre- 
sented by a peg bearing the symbol of the car and inserted in a block 
which represented the train. The route over which the cars moved 
was represented by a board on which vertical lines and spaces indi- 
cated the various stations from which "passing" reports were made. 
When a train was reported to have passed a station, the block repre- 
senting the train was moved past the place on the board that repre- 
sented the station. The telegraphic report mentioned each car in 
the train; cars not so mentioned were accounted for, with the reason 
for delay, or were the subject of prompt inquiry from the central 
office. This system is now in use on a number of railroads. The 
information shown on the board is kept also in written form, and, on 
some railroads, it is summarized in circulars, issued daily. The 
"board" is a convenient but not an essential part of this system. 
Some railroads do not use a board at all; they keep all their "passing " 
records on paper. 

To facilitate telegraphing in some of these "passing-report" sys- 
tems, each car may be given a symbol after the train is made up. The 
symbol consists of a letter or group of letters, which indicate the 
station of origin, and a number to designate the car. The car is 






TRANSPORTATION AND STORAGE FACILITIES 591 

known by this symbol until it reaches its destination and the contents 
are delivered. 

The average rate of speed over long distances for carloads of 
perishable freight depends largely upon the character of the roadbed 
and the number of transfers from one railroad to another. From 
Los Angeles to Chicago and from Jacksonville, Florida, to Chicago 
the rate of speed averages about 13 miles an hour, including all stops. 
One train was scheduled to run from Los Angeles to Chicago in 173 
hours and 25 minutes, the average rate being 13 . 1 miles per hour. 
A vegetable express run from Jacksonville to Chicago over three or 
four different railroads covers about 1,140 miles in 89! hours, the 
average rate being 12.7 miles per hour. By another route the trip 
from Jacksonville to Chicago is reported to be made in as short a time 
as 84 hours. Over some routes which do not traverse mountains the 
average rate, including stops, is about 16 miles per hour for long dis- 
tances. A certain train from New Orleans to Chicago covers 930 
miles in 57 hours and 20 minutes, the average rate being 16.2 miles 
per hour; and on the Atlantic Coast a train carrying Florida produce 
northward runs from Tampa, Florida, to Richmond, Virginia, in 54 
hours and 15 minutes, making an average of 15.8 miles per hour. 
After a train is once made up and does not have to stop so often to 
receive new cars the rate of speed is naturally much higher. Between 
Memphis and Chicago the average rate of speed for a certain train 
is 18 miles per hour, while the rate from New Orleans to Memphis is 
14 to 15 miles per hour. From Tampa to New York the rate for the 
distance south of Potomac Yard, Virginia, is about 16, while the dis- 
tance between Potomac Yard and New York is covered at an average 
rate of more than 18 miles per hour. 

At the rates of speed mentioned in the preceding paragraph, a 
train would run from 312 to 432 miles in 24 hours. The time taken 
to move cars from Potomac Yard, Virginia, just south of Washington, 
D.C., to New York, is about i2f hours; to Boston from Potomac 
Yard, 36! to 40 hours; and to Montreal, 46! . These figures include 
the time required for icing and for transferring the cars from one road 
to another. From Miami to Chicago the time required is about 10S 
hours. It is thus possible for fruit and vegetables grown in regions as 
far away as southern Florida to be delivered to consumers in Chicago 
or New York within five or six days from the time of gathering. 

While these fruit and vegetable trains, as any others, may be late 
sometimes, nevertheless their regularity is such that transactions are 



592 AGRICULTURAL ECONOMICS 

reported to be made often, if not usually, with the expectation that 
the produce involved will be delivered at about a certain time on a 
certain day. For instance, a car of vegetables from a South Atlantic 
shipping point may be bought by a dealer, who expects the car to 
reach Jersey City on a Friday night in time to be ferried across North 
River to a wholesale market in New York, which opens at i : oo a.m. 
Should this car be delayed several hours the vegetables would miss 
the Saturday market and might be delayed two days in reaching the 
retail merchants. 

Two instances of delays will serve as illustrations. A merchant 
in Philadelphia mentioned a consignment of strawberries which 
reached that city from Florida six days late, and a Chicago dealer 
complained, about the same time, of losing $500 on a car of straw- 
berries that reached him too late to take advantage of a good market. 
Delays like these, it is believed, are by no means as frequent under 
present conditions of freight service as in earlier times. 

Information as to the location of a given car in transit may usually 
be obtained from the railroad company which is hauling the car. 
But some large shippers have a system of their own by which they 
trace the movement of cars in transit, in order to distribute them 
among the different markets to the best advantage. One organiza- 
tion in California adopted this system of distributing shipments: 
When a member shipped a car of produce, he turned the bill of lading 
over to the manager of the organization and allowed him to direct the 
movement of the car to market. The object of having one central 
authority select the markets was to prevent sending an oversupply to 
any one place. On receiving the bill of lading, a record of the car was 
made on a card in the office of the organization and the card filed in 
its proper place in a drawer. This drawer was divided into several 
rows of compartments, opening upward; each row had 31 compart- 
ments, and there was one row for each principal market in the United 
States. The 31 compartments represented each one day of a month. 
When a card was filed, its location was determined by the destination 
named in the bill of lading and by the day of the month on which the 
consignment was due at the destination. For instance, a carload of 
cherries shipped to New York from a point in the Sacramento Valley 
on May 27 would be represented by a card filed in the New York row 
of the drawer and in the compartment numbered 7, if the consignment 
would be due in New York on June 7. The arrangement of these 
cards showed at a glance the intended distribution of this association's 






TRANSPORTATION AND STORAGE FACILITIES 593 

shipments among the different markets, and when too many consign- 
ments of a given kind of fruit were on the way to a given market the 
grouping together of several cards in one box served as a warning that 
the destination of one or more cars should be changed. This drawer 
showed only such fruit as was shipped by this association. News of 
other shipments and of their probable time of arrival at destination 
was secured, to some extent, by the association. When it became 
known that a certain market was about to receive an oversupply of 
a given fruit, one or more of the shippers who had consigned to that 
market would be notified by the association manager, so that they 
might select another city to which to divert their consignments. In 
case they should refuse to make such a selection the rules of 
the association gave the manager the right to divert the shipments 
himself. 

The movement of a car in transit was traced by the association 
by a system similar to that used by some railroads. Each car shipped 
East by the association was reported by telegraph as it passed certain 
points along the way. 

In a similar way other large shippers keep in close touch with the 
progress of a car on its way to market, at the same time keeping 
informed as to the prices and relative supplies in different cities and 
towns. 

For produce moving from the South northward many of the prin- 
cipal points of diversion are along the Ohio and Potomac rivers, but 
the route of a car may be changed at any one of a large number of 
railroad-junction points. Cairo, Louisville, Cincinnati, and Potomac 
Yard (near Washington) are important points from which these ship- 
ments are distributed among various destinations. 

Between eastern markets and producing regions in the far West 
and Southwest the chief points of diversion include Minnesota Trans- 
fer (between St. Paul and Minneapolis), Council Bluffs, Chicago, and 
St. Louis. Over one route from central California to the East the 
principal points from which one leading shippers' association receives 
"passing" reports are Roseville and Truckee in California, Ogden, 
Council Bluffs, and Chicago. A Cincinnati firm may receive notice 
of a Florida shipment when the car passes Jacksonville, Atlanta, and 
Chattanooga, and another notice just before the arrival at Cincinnati. 
On peaches shipped by this fast-freight service to northeastern 
markets from Tampa, a car's progress over a certain route is 
reported from Jacksonville, Florida; Savannah, Georgia; Columbia, 



594 AGRICULTURAL ECONOMICS 

South Carolina; Hamlet and Raleigh, North Carolina; Richmond 
and Potomac Yard, Virginia. 

The service of diversion includes not only changing the destina- 
tion of a car in transit but forwarding it to a destination beyond the 
one originally named. For instance, a car shipped to Cincinnati may 
be forwarded under certain conditions to Indianapolis for unloading; 
or, it is reported, a car consigned to a given town may be partly 
unloaded there and the remainder of the consignment sent on to 
another town. This, however, costs more in freight than would a 
direct shipment of a full carload to one market. 

Conditions on one route will illustrate how the system of reporting 
car movements may be used by a patron of the railroad. Suppose a 
dealer in Chicago, on a Thursday morning, wishes to know the loca- 
tion of a carload of tomatoes which were shipped to him the morning 
before from Crystal Springs, Mississippi. He makes the request of 
the railroad company's agent in Chicago, giving the initial and num- 
ber of the car and the date and place of shipment. On consulting the 
"passing" reports it is found that this car, known in transit by the 
symbol "CS-4," passed Fulton, Kentucky, at 6:00 a.m. that day 
(Thursday) and would be due at Cairo, Illinois, at 8:30 a.m., or, let 
it be assumed, about an hour after the time the dealer made inquiry. 
It would be due in Chicago Friday at 4: 50 a.m. With this informa- 
tion the dealer knows that, if he desires to divert the car, he may 
select one of a number of markets located north of the Ohio River. 
He knows that there is a large movement of tomatoes toward Chicago 
and believes that the prices on Friday will be better in some other 
places than in Chicago on the day his produce is due on the market. 
He has already received news from some points. An associate in 
St. Louis may have telegraphed the evening before that the supply 
already in that market, together with what was due to arrive on 
Thursday, would be about as much as could be sold at fair prices; 
that, if more was received, prices would probably be low. On the 
other hand, a report from Indianapolis may indicate good prices for 
Friday morning, better ones than are promised in Chicago for that 
day; so the Chicago dealer orders the car to be diverted to Indian- 
apolis. He may wait until 3:00 p.m. Thursday before reaching this 
decision, so that he may hear from other markets. Meanwhile the 
car has been moving northward. The order for diversion is sent by 
the superintendent of transportation to the proper official at Effing- 
ham, Illinois, where the car is due to arrive about 5:45 p.m., and 



TRANSPORTATION AND STORAGE FACILITIES 595 

where transfers are regularly made for Indianapolis. It reaches that 
city early Friday morning, about the time it would have reached 
Chicago had there been no diversion. 

186. CONCENTRATION AND STORAGE-IN-TRANSIT 
PRIVILEGES 1 

By T. F. POWELL 

The lack of proper assembling methods is one of the chief diffi- 
culties encountered in a successful solution of the marketing problem. 
In localities where suitable common or cold storage facilities are 
available, the growers of farm products would find the concentration 
and storage-in-transit privileges two of the most desirable means for 
bringing about the widest distribution. Shippers, as a rule, are not 
familiar with these arrangements; if they were utilized more fre- 
quently it would enable shippers to move their freight to market in 
carload lots, thus securing the benefit of the lowest rates and the 
quickest service. 

Concentration is defined as the shipment in less than carloads of 
certain commodities to certain points, after which the shipments are 
reforwarded in carload lots. 

Storage in transit is defined as the shipment in carloads to storage 
points of freight which has already been combined into carload lots 
under or independent of the concentrating arrangement. 

The concentrating privilege at the present time is confined largely 
to butter, cheese, eggs, and poultry and permits of grading, mixing, 
repacking, and storing. Under this arrangement live poultry in car- 
loads is frequently shipped to a concentrating point and dressed 
poultry in carload lots is forwarded from such concentrating point. 
In some cases special any-quantity rates are provided to concentrating 
points. In other cases the carload rate in effect from original point 
of shipment to final destination is applied plus an additional charge 
of 5 or 10 cents or more. 

The storage privilege is allowed on all of the above commodities, 
and concentrated carload shipments of such commodities forwarded 
from a concentrating point in some sections may be stopped once in 
transit for storage. Storage in transit independent of the concentrat- 
ing privilege is allowed also on green apples in packages, onions, 

x From Farmers' Bulletin 672, United States Department of Agriculture, pp. 
15-16. 



596 AGRICULTURAL ECONOMICS 

potatoes, celery, hay, grapes, and other produce in carload lots for 
periods varying from six months to a year. 

The privilege is granted free of charge in rare instances. Usually 
an additional charge of from ij to 3 cents per 100 pounds is made. 
Ordinarily the shipments pay full tariff rate to the storage point, and 
when reshipped the charges are adjusted on the basis of the through 
rate in effect at date of original shipment from point of origin to final 
destination plus the storage charge. Where both the concentrating 
and storage privileges are used, a separate charge for each privilege 
is made. 

The concentrating privilege can be utilized most successfully in cases 
where several small points of production of a particular commodity in 
certain districts are somewhat widely separated. It would be of 
advantage in such cases to concentrate small shipments and combine 
them into carload shipments at certain points and move them from 
these concentration points to distant markets or, by also utilizing the 
storage-in-transit privilege, to put the freight into storage at some 
convenient point and afterward move it to final destination at the 
carload rate. Arrangements of this kind would enable small pro- 
ducing points to reach markets which otherwise would be out of 
reach, and would benefit the railroad by giving them a long haul on 
the traffic. 

Concentrating rates are also of benefit to the railroads by increas- 
ing the size and regularity of shipments. They benefit the shippers 
by enabling them to secure the carload rates, to secure quicker service, 
and to permit them to supply the market at times when their products 
are most in demand. Both of the privileges are susceptible of much 
greater development in all sections and should be encouraged by the 
railroads. It would be well worth while for the railroads, as well as 
associations of shippers in various sections, to make a closer study of 
the suitability of such arrangements in particular localities. Such a 
study should be of especial interest to the shippers in the South, 
where many new problems connected with the distribution of new 
products must constantly arise for solution as crop diversification 
progresses. 

If shippers feel that either of these transit privileges would be of 
benefit and are prepared to supply suitable warehouse facilities, they 
should then arrange to confer with officials of the interested railroads. 
In this way a friendly discussion would develop as to how the arrange- 
ments could be made to fit any particular local conditions. Shippers 



TRANSPORTATION AND STORAGE FACILITIES 597 

should always keep in mind, however, that service is the only thing 
the railroads have to sell and they should be willing to pay the rail- 
roads a fair additional charge for this or any other benefit which 
involves an extra cost on the part of the railroads, and which renders 
the service more valuable to the shippers. 



187. CAR SUPPLY IN RELATION TO MARKETING THE WHEAT 

CROP OF 1914 1 

By G. C. WHITE 

Since trade journals and railway periodicals have called attention 
to a possible car shortage, the Office of Markets has undertaken an 
investigation to ascertain to what extent a car shortage this year is 
anticipated by the grain trade, on what roads shortages are most 
acutely felt, to what extent the trade keeps in touch with the roads, 
advising prospective needs, what information is given out by the 
roads as to ability to fill all orders promptly or steps taken to minimize 
shortages, and whether or not the car supply keeps pace from year 
to year with the increasing need for cars. 

The sentiment among country elevators is by no means universal 
that there will be a car shortage; terminal elevators are more nearly 
unanimous. As to where shortage is most acutely felt, opinions 
differ — apparently according to the particular road on which a man's 
elevator is located. Car supply is sometimes due to the volume of 
inbound merchandise, which, when unloaded, makes available empties 
for outbound grain shipments. Points served by more than one road 
testify that they can get cars even when non-competitive points are 
suffering from a shortage. 

Information from the country elevators is, for the most part, that 
their advice to the roads of cars needed is in the form of orders for 
cars at the time they are wanted. Terminal elevators and large grain 
dealers, however, have kept in closer touch with the situation and 
have advised the carriers as far in advance as possible of the pros- 
pective needs. 

On the part of the roads statements from officials through the press 
are given to the public, and growers and elevator men are personally 
advised by local agents, traveling freight agents, and other repre- 
sentatives of all steps taken to minimize shortages. Every purchase 

1 Adapted from "The Agricultural Outlook, July 21, 1914," Farmers' Bulle- 
tin 611, pp. 23-25. 



598 AGRICULTURAL ECONOMICS 

of new cars is advertised and assurance is given that all cars are being 
put in condition to handle bulk grain. In some cases large numbers 
of stock cars are being temporarily fitted up for handling grain. As 
far as possible, foreign empties are being held by the grain-carrying 
roads, and country sidings are being filled with empties for the first 
rush. 

It is the consensus that the increase in car supply does not keep 
pace from year to year with increasing need for cars. 

Only 58.1 per cent of the wheat produced is shipped out of the 
county where grown, and on this basis the number of cars required 
to move the winter wheat crop of the United States would be 304,444 
and 178,948, for that of seven most important wheat-growing states. 
On the same basis it would require approximately 432,000 cars to 
move the entire wheat crop of the United States. 

The total number of box cars owned by all the roads in the United 
States June 30, 1911 (the last report available), was 990,313. Taking 
15 of the principal roads in the seven states covered by our investiga- 
tions, we find that they had on July 30, 1913, 60,446 miles of road and 
223,487 box cars. Their aggregate mileage increase for the two years 
from June 30, 191 1, to June 30, 1913, was 3 per cent, the increase in 
the number of their box cars, 3 per cent, and the increase in the tonnage 
capacity of their box cars, 7 J per cent. The figures for individual 
roads vary from a decrease of 14 per cent in the number of box cars 
to an increase of 32 per cent, and in tonnage capacity from a decrease 
of 5 per cent to an increase of 50 per cent. These 15 roads contain 
approximately 25 per cent of the entire mileage of the United States 
and own approximately 22 per cent of all the box cars. The seven 
states in question produce approximately 40 per cent of all the wheat 
of the United States. What the percentage of increase is over the 
191 1 crop is hard to determine for the area served by these 15 rail- 
roads, but it is safe to say that it has been far greater than the per- 
centage of increase in car supply, inasmuch as the estimated yield of 
winter wheat for the entire United States for 1914 exceeds the 191 1 
crop by 52 per cent, and the increase in car supply during 19 13-14 
has been below normal throughout the country. 

These figures are given, not as furnishing an exact formula for 
determining the number of cars needed to move this year's wheat 
crop and for estimating the shortage in number of cars, but as indi- 
cating some of the factors to be taken into consideration in the problem 
of car supply and car shortage. Other factors are these: The wheat 



TRANSPORTATION AND STORAGE FACILITIES 599 

harvest will extend over 3 months or more from about June 10. 
Doubtless much wheat will be stored after harvest awaiting better 
prices. Not all the cars of any road serving the wheat belt are 
available for wheat traffic. The Santa Fe system, for instance, with 
extensive mileage in New Mexico, Arizona, and California, must 
necessarily keep a large part of its cars confined to the business of 
those states. Account must be taken of general commercial condi- 
tions also, and of whether the tonnage of other commodities handled 
in box cars is above or below normal during the wheat movement. 
Indications this year are for a heavy crop of corn and oats, the move- 
ment of both of which commodities will still further complicate the 
situation as regards wheat. 

In the long run every man gets all the cars ordered, and from that 
point of view there is no shortage. No statement of "car shortage" 
means anything until we know the time limitation and other condi- 
tions on which it is based. In its semi-monthly bulletins of car sur- 
pluses and shortages the American Railway Association lays down the 
rule that the figures must represent the differences between "cars 
ordered" on a given day and "cars available." "Cars available" is 
defined as any empties of the kind ordered, either en route in trains 
or on sidings, which can be used to fill the orders of that day, and 
includes also such loaded cars as will be made empty within 24 hours. 

The opinion prevails in some sections that any shortage this year 
will be due more to lack of motive power and terminal facilities than 
to lack of cars. One of the greatest drawbacks has always been 
failure to load and unload promptly and too frequent reconsigning 
of shipments. The indications are that shippers and carriers are 
co-operating this year more closely than ever before in their efforts 
to avert a car shortage in the movement of the wheat crop. 

188. TERMINAL FACILITIES 1 

The principal purpose of this Committee has been to show how the 
difficulties and expense surrounding the terminal situation in New 
York City have increased during the past ten years with particular 
reference to food products, rather than to consider the terminal ele- 
ment in food costs absolutely, although certain facts in regard to the 
latter will be referred to. The keynote of the terminal problem of 

Adapted from Report of the Committee on Terminals and Transportation, of 
the New York State Food Investigating Commission, pp. ro-34. 



600 AGRICULTURAL ECONOMICS 

New York City is its geographical location. Owing its greatness to 
an unsurpassed harbor, its very strength has become a source of 
weakness in the handling of its internal commerce, and in economically 
providing the necessities of life for its inhabitants. As a result of the 
city's maritime and commercial pre-eminence its population includes 
approximately rive out of the nine million persons living within the 
borders of the state. Furthermore, its growth has been particularly 
phenomenal in recent years. Between the census of 1900 and that 
of 1 9 10 the city as a whole increased 39 per cent. 

It has not been possible to secure exact figures in regard to the 
increase in the receipts or consumption of food products in the city 
during this same period, but it may properly be assumed that their 
increase has been commensurate with the increase in population. 
The mere fact that the amount of food received has increased 39 per 
cent in a decade would be sufficient to account for a serious terminal 
problem. The most cogent consideration, however, and that which 
even more than the amount of the increase has led to increased ter- 
minal difficulties in this city, is the distribution of the increase among 
the various boroughs. By far the most marked increases in popula- 
tion occurred in the boroughs of the Bronx and Queens, the most 
remote portions of the city. During the same period not only have 
the terminal facilities failed to keep pace with the growth of the popu- 
lation, but they have also failed to follow the population in its spread 
away from the old centers where the long-established railroad ter- 
minals are found. 

Some of the most important difficulties resulting from this situa- 
tion may here be pointed out. As stated above, the terminals have 
not followed the population. There has been considerable terminal 
development in the Bronx and Queens to be sure, but it has not been 
proportionate to the increase in population in those sections, and even 
had it been proportionate the problem would not have been entirely 
solved, since the principal receiving point for produce continues to be 
the lower west side. This is because the downtown terminals have 
developed into well-recognized markets for food products and their 
removal would greatly disturb commercial conditions. Therefore, as 
the population which consumes the food products has gradually 
spread away from the terminals, the haul from the terminals to the 
ultimate consumer has correspondingly increased. As nearly as can 
be ascertained, the primary trucking haul — that is, from the terminal 
to the first stopping place of the commodity — has not increased, as the 



TRANSPORTATION AND STORAGE FACILITIES . 60 1 

primary storage points are still located near the terminals. But the 
secondary and tertiary hauls from the primary storage points and 
from subsequent distributing points have increased most substantially, 
increasing, of course, the cost to the consumer. 

Nor is this the only effect which the increase in the food traffic has 
had on the cost of delivering it. As a result of the greater quantity 
of this traffic in proportion to the terminal facilities, it is probably 
true (although accurate information is not obtainable) that consider- 
able expense results from the delay to trucks at terminals while await- 
ing an opportunity to take delivery of their freight. This time must, 
of course, be charged against the commodity to be delivered. 

Waste similar to that of competitive distribution is also found in 
the competitive assembling of many foodstuffs at initial shipping 
points, although this condition is probably less obvious because more 
widely scattered. Many buyers and commission men conduct their 
business in the various fruit and produce districts where such com- 
modities as apples, peaches, cabbage, and celery originate, as a result 
of which shipping facilities, warehouses, and storehouses are duplicated 
and much expense and delay in the switching and handling of cars 
results. Furthermore, numerous shipments are made in less-than- 
carload lots at rates higher than would be applicable were all of the 
shipments in carloads, while the holding of the cars until a full load 
can be secured conduces to the uneconomical use of railroad equip- 
ment. 

Frequently a shipper, in order to make sure that his shipments 
will be fully protected, will order the maximum number of cars which 
he may need as a result of which some when tendered may be rejected 
or held on tracks under demurrage which also conduces to uneco- 
nomical railroad operation. Indeed, the present unorganized method 
of assembling and forwarding foodstuffs from points of production 
produces acute competition for transportation facilities, often result- 
ing in great hardship upon individual shippers and imposing a burden 
upon the carriers largely in excess of that which would be necessary 
under more economical methods. 

We have already indicated how few rail terminals there are in 
New York City. The majority of deliveries are made at piers which 
are reached either by floating cars and placing them upon tracks on 
the piers by means of float bridges or by transferring freight in bulk 
by means of lighters, in which case the lighters are tied up alongside 
the pier where delivery is to be made and the freight unloaded on the 



602 AGRICULTURAL ECONOMICS 

pier. By far the largest part of the freight coming into New York 
City is handled in this way. The arrival of the freight at its destina- 
tion, whether in a car on a track, in a freight house, or on a pier, does 
not complete the service which the carrier performs. The rate 
charged for the transportation covers not only the movement of the 
freight, but the holding of it for a considerable period of time free of 
charge. In many instances this latter service is almost as valuable 
to the shipper or consignee as the transportation itself. Thus, carload 
freight which is tendered to the consignee in the car on a delivery 
track is allowed two days' free time before track storage or demurrage 
charges are imposed. This is in theory intended to allow the con- 
signee an opportunity to unload the car. In many instances, however, 
two days is greatly in excess of the amount of time necessary for the 
actual unloading, and the time is used as a free storage period to assist 
the consignee in the conduct of his business. In the case of freight 
shipped in less-than-carload lots to New York City, Brooklyn, and 
Jersey City, it is held free of charge for three days, Sundays, legal 
holidays, and the day of arrival excluded, and at the end of that time 
if not removed a storage charge is imposed of five cents per ioo pounds 
for each thirty days or fraction thereof. In the case of carload freight 
shipped to New York "lighterage free," ten days' free time is allowed, 
excluding Sundays, legal holidays, and the day of arrival, while waiting 
the order of the consignee for final delivery. The same free time is 
allowed on less-than-carload freight shipped to a specific New York 
City station if it is held for orders at the request of the consignee. At 
the expiration of this period of ten days the freight is stored at a rate 
of one cent per ioo pounds for the first ten days, and one-half cent 
per ioo pounds for each succeeding ten days. Freight so stored may 
subsequently be delivered at any point within the free lighterage 
limits of the port within six months after being placed in storage. 

In the case of freight shipped to New York " lighterage free" and 
subsequently delivered to vessels for export, thirty days' free time is 
allowed. In the case of perishable freight in refrigerator cars, ten 
days' free time is allowed, and if it is not removed at the expiration 
of the free time it is held in cars under refrigeration at a charge of one 
cent per ioo pounds for the first ten days and one-half cent per ioo 
pounds for each succeeding ten days. 

The time of arrival of various products in New York City is so 
arranged that they may be available for the various markets, in order to 
avoid holding over until the next day, which would result in loss due to 



TRANSPORTATION AND STORAGE FACILITIES 603 

shrinkage, or the necessity of selling after regular market hours. In 
the case of products so handled various special terminal facilities are 
provided. Thus milk is unloaded upon milk platforms in Jersey City 
and Manhattan and distributed to the consumer in time for breakfast. 
These platforms occupy valuable real estate, and are used for the milk 
traffic only in the morning when the milk is coming in and later in the 
day when the empty cans are returned. Nevertheless, these facilities 
are reserved exclusively for this business, because of the sanitary regu- 
lations of the board of health. The platforms and surroundings are 
regularly inspected, and must be kept absolutely clean and in a sani- 
tary condition. With this end in view special precautions are taken, 
such as having the platforms washed every day and keeping the lower 
sides whitewashed. In like manner the roadways leading to these 
platforms must be given special care. All of these special facilities 
are accorded the consignees of milk without any additional charge. 
In the same manner, during the spring and summer months green 
vegetables and fruits are delivered to the market between Jay Street 
and Perry Street, North River, every morning in time for the early 
market. A number of roads also maintain auction rooms for the 
sale of fruit and vegetables. 

D. Some Phases of the Storage Problem 
189. REGULATING THE SALE OF COLD-STORAGE EGGS 1 

Every person, firm, or corporation who does a wholesale or jobbing 
trade in cold-storage eggs, or who offers cold-storage eggs for sale, is 
hereby required to mark all cartons and all cases containing eggs in 
cartons or otherwise with the words "cold storage," in a conspicuous 
place on the outside of the carton and case; and to mark plainly on 
the face of all invoices and bills the words " cold-storage eggs," in billing 
or invoicing, for the sale of eggs that have been kept in cold storage or 
refrigeration; and also to display in a conspicuous place in their place of 
business, in full view of the public, a card upon which shall be printed 
" cold-storage eggs sold here," in letters at least two inches in height. 2 

1 Rules and bulletins issued by the New York State Department of Foods 
and Markets. 

2 Retailers were likewise required to post a sign "cold-storage food sold 
here" and issue with each sale of cold-storage eggs, a bill or invoice plainly marked 
" cold-storage eggs." They must also post a sign in full view of the public, in or 
near the container, bearing the words "cold-storage eggs" and the price plainly 
marked for which they are sold. 



604 AGRICULTURAL ECONOMICS 

BULLETIN NO. J 

November 5, 19 15 

The information received by the Department is to the effect that 
eggs placed in storage in March, April, and May, at prices ranging 
from 18 to 21 cents per dozen, and which could be sold at wholesale 
at this time with a reasonable profit at 23 to 24 cents per dozen and 
retailed to the consumer at not to exceed 30 cents as cold-storage eggs, 
are being sold to the consumer at prices ranging from 35 to 60 cents 
per dozen. Besides being a hardship to the average family of modest 
means, this excessive price restricts consumption and indirectly dis- 
courages the production of eggs. It is to the interest of all concerned 
that, when there is a surplus and prices are low, eggs should be placed 
in storage for consumption in times of scanty production, and the 
investor must be allowed a fair percentage of profit for his investment 
and risk, but storage facilities is something of a public utility and 
excessive speculation in stored products is an injustice to the consumer 
and even of doubtful benefit to the dealer. 

Under the authority of the state statute, retailers are directed to 
demand of their supply houses invoices plainly marked "cold-storage 
eggs," and housewives are requested to demand receipts from retailers 
plainly marked with "cold-storage" or "fresh eggs," as the purchase 
may warrant. 

In any case of violation or refusal, or in any case where eggs 
bought as "fresh" are thought to be "cold-storage eggs," report 
should be promptly made to the New York State Department of 
Foods and Markets, 204 Franklin Street, New York City, with all 
the details of the transaction. 

The present wholesale price of cold-storage eggs does not justify 
a retail price in excess of 30 cents per dozen for best quality cold- 
storage eggs. Such eggs are now on sale at various places in the city 
at this figure, and if the housewife is unable to secure her supplies at 
this cost, the Department will direct her to retailers who will be glad 
to supply them at this price. 

The entire force of this Department, and the state and city health 
departments, numbering nearly 100 men and covering the entire city, 
have been directed to watch particularly from now on for the violation 
of the cold-storage law in the sale of eggs in the wholesale, jobbing, 
and retailing trade. Evidences of violation of the law will be gathered 
and reported, and where this evidence justifies, prosecution will follow. 
Sufficient warning has now been given to the trade, and where informa- 



TRANSPORTATION AND STORAGE FACILITIES 605 

tion is received to justify prosecution, this Department will go into 
court and insist on the full penalty of the law in every case in which 
a conviction has been secured. 1 

John J. Dillon, Commissioner 
New York State Department of Foods and Markets 

190. THE LENGTH OF TIME FOR WHICH GOODS ARE STORED 2 
By GEORGE K. HOLMES 

The movement into and out of storage of the six commodities 
covered by this investigation can well be compared in Diagram A. 
For instance, at the end of the diagram, in the section for eggs, the 
continuous line representing receipts 'shows at a glance that the bulk 
of the year's receipts go into cold storage in April, May, and June, 
during which time the deliveries, represented by the broken line, are 
almost nothing. The situation is reversed from October to January, 
when the receipts into cold storage are exceedingly small and nearly 
the entire deliveries of the year are made. 

The equalizing of consumption throughout the year by taking into 
cold storage a portion of the supplies during the season of high pro- 
duction and distributing it for consumption during the period of low 
production is here illustrated. In the case of fresh beef, for instance, 
receipts into cold storage are heavy in September and October, while, 
as indicated by the broken line, the deliveries out of cold storage 
present only an undulating line, in a nearly horizontal position, 
throughout the year. The even distribution of cold-storage beef 
throughout the year is evident at a glance. The same observation 
holds true with regard to the distribution of fresh pork and quite so 
with regard to butter. 

In the consumption of cold-storage dressed poultry, it should be 
remembered that the demands of Thanksgiving and Christmas are 
sufficient to cause an enormous increase. 

The marked increase in the consumption of cold-storage eggs in 
the winter is compensatory to the marked decline of egg production 

1 In a later bulletin the commissioner says that after the publication of the 
above "many houses in the trade, wholesale, jobbing, and retail, as well as the 
trade press, have expressed a desire for the enforcement of the law and com- 
mended the determination of the Department to enforce the sale of cold-storage 
eggs as such." 

2 Adapted from "Cold Storage Business Features," Bulletin pj, Burec 
Statistics, United States Department of Agriculture, pp. 2S-45. 



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Diagram A. — Receipts into and deliveries out of cold storage in one year, 
1910-11. [Receipts, 1910-11; deliveries from receipts of 1909-10 and 1910-11.] 



TRANSPORTATION AND STORAGE FACILITIES 



607 



during that time, and if the consumption of cold-storage eggs is com- 
bined with that of fresh eggs, the consumption of the two during the 
winter would be expressed by a depressed line. 

Many persons imagine that goods are allowed to remain in cold 
storage for very long periods of time. This study of actual conditions 
indicates that the bulk of the beef is delivered within a period of seven 
months after entering storage and that a large fraction is stored less 
than one month. The movement of fresh pork is still more rapid, 
so that little remains after storage for two months. After dressed 
poultry has been stored for one month the exhaustion of the stored 
stock proceeds steadily, and after the lapse of half a year only a 
small fraction is continued in storage. The distribution of butter 
for consumption proceeds with comparative evenness from about the 
second month of storage onward for six months, so that by the end of 
the eighth month 88 .4 per cent has been withdrawn. Eggs are com- 
monly kept in storage for from six to nine months, and by the end 
of ten months 97 . 2 per cent have been taken out. (See table.) 

PERCENTAGE OF RECEIPTS OF 1909-10 DELIVERED AFTER STORAGE 
FOR ONE, TWO, THREE, ETC., MONTHS 





Deliveries from Receipts of 


Months of Storage 


May, 1909, to April, 1910 


March, 1909, to February, 
1910 




Beef 


Mutton 


Pork 


Butter 


Poultry 


Eggs 


Under 1 

1 

2 

3 

4 

5 ••••• 

6 

7 

8 


Per 
36 
10 
11 
12 
14 

8 
3 


Cent 
7 
3 
3 
9 
8 
8 
3 
9 
3 
3 
1 

Is 


Per 

7 
6 

5 
8 

13 
19 

28 
8 


Cent 
7 
9 
3 
9 
9 
5 
8 

3 

1 
1 

N 


Per Cent 
78.I 
II. 9 

3-2 

2.0 

i/3 

1 .0 

1 . 2 

1 . 2 
* 

* 

* 


Per Cent 

5-5 

9.9 

12.0 

12.8 

13.2 

14-5 
13.6 

6.9 

4-5 

3-7 

1. 2 
. 1 

1.0 

. 1 

* 

. 1 

* 


Per Cent 
22.5 
26. I 
14.8 
12.3 
9.6 

5-7 
3-i 
2.0 

i-4 
.8 
.6 
•3 
•3 
. 1 

. 1 

* 

* 
* 


Per Cent 
2.8 
3-1 
3-8 
4.6 

8.3 
138 

18.0 

21.4 

13-8 

7-6 

2 ■ 7 
. 1 


9 

10 

11 


12 


* 
* 
* 
* 








13 

14 

15 




















16 








17 








18 

























* Less than 0.05 of 1 per cent. 



608 AGRICULTURAL ECONOMICS 

The fresh beef received into storage during the year beginning May, 
1909, was kept there on the average for 2 . 28 months; the fresh mutton, 
4 .45 months; the fresh pork, o . 88 of one month, and the butter, 4 .43 
months. The poultry received during the year beginning March, 
1909, was kept on the average 2 .42 months; the eggs, 5 .91 months. 

It is apparent that long storage is exceptional. The costs of cold 
storage are running against the prices of the commodities month by 
month. The owners must use good judgment and take their goods 
out of storage before the costs of storage, added to the original cost 
of the goods and some profit, will raise the total amount of cost above 
the market price. Sometimes the owner of the goods errs in judgment 
and fails to make a profit; again, he fails to get back the cost of goods 
and the costs of storage; and yet again he gets back all costs and a 
large rate of profit. 

If the three costs — for space in the warehouse, interest on the 
value of the goods stored, and insurance upon them — are combined, 
they amount to 0.437 °f I cen t per pound of fresh beef per month, 
or 3 . 5 per cent of the mean wholesale price of beef from September 
to November, 1910; for fresh mutton the costs are 0.352 of 1 cent 
per pound, or 3 . 8 per cent of the mean wholesale price in the heavy 
storage months, August to October, 1910; for fresh pork, 0.397 of 
1 cent per pound, or 3 .7 per cent of the wholesale price; for dressed 
poultry, o . 446 of 1 cent per pound, or 2 . 8 per cent of the wholesale 
price; for butter, 0.571 of 1 cent per pound, or 2.4 per cent of 
the wholesale price; and for eggs, the costs amount to 0.593 of 1 cent 
per dozen, or 3 per cent of the mean wholesale price of eggs. 

It is evident that, as the time of storage lengthens, the costs and 
their percentage of the wholesale price must be multiplied by the 
number of months. If the storage is for 6 months, for instance, the 
cost per pound ranges from 2. 112 cents for fresh mutton to 3.426 
cents for butter, and is 3 .558 cents per dozen for eggs. The costs for 
6 months range from 14 . 6 per cent of the wholesale price in the case 
of butter to 23.0 per cent in the case of fresh mutton. 

191. THE LIMIT TO COLD-STORAGE SPECULATION 1 
By M. LIPPITT LARKIN 

In the years 1902-5 the profits of the butter dealers attracted 
the attention of outside capitalists ; not that they cared to enter the 
butter business proper, but that they wanted to reap a part of the 

1 Adapted from the Journal of Political Economy, XX (March, 191 2), 
pp. 270-74. 



TRANSPORTATION AND STORAGE FACILITIES 609 

profits by coming in between the creamery and the dealers. They 
bought butter to resell it to the latter. The immediate result was 
one which is customary in bullish market's. Prices went up. More- 
over, the problem of ascertaining the actual demand became more 
complex. A false, unreal, speculative demand was created on the top 
of the market and people became freer in their purchases, steadily 
boosting up the price, unmindful temporarily of the work of the slowly 
operating negative forces, such as limited demand, decreasing con- 
sumption, substitutes, and imports, the influence of which is taken 
up below. Dealers themselves naturally were affected — they too 
began to speculate. To their assistance came the storage houses, 
which were, of course, anxious to increase the amount of goods put 
away in storage. The cold-storage business became so profitable that 
it invited serious competition, and new methods to attract the dealer 
became necessary. Lowering the rates for storing was not enough 
of an inducement and it would cut the profits. To begin with, they 
took over the very legitimate work of lending money on butter at 
the regular banking rates. Dealers cannot usually afford to lay out 
all the capital necessary to finance the storing of butter and they will 
rather borrow the money from cold storages than from banks, if not 
for any other reason than to be able to take out butter the moment 
they need it without going for the bank's release. Then there is the 
advantage of having a larger balance in the bank for an extra day. 

But storage houses soon began to compete as to the amount lent 
on each tub of butter. For instance, up to 1908 the Quincy Cold 
Storage House had monopoly over the storage business in Boston. 
It did the legitimate business of keeping the butter in a certain tem- 
perature, leaving lending operations to the banks. The Boston Ter- 
minal Storage, when opening up in Boston in 1909, started at once to 
lend money on butter. The Quincy House had to follow. From $10 
per tub the amount lent soon went up to $13, and finally the Boston 
Terminal, backed by capitalists, began to give $16 on 60-lb. tubs of 
butter. Moreover, they would allow a dealer to buy butter on drafts, 
attending themselves to the payment of the latter and collecting from 
the dealers the difference between $16 and the actual cost of the tub 
of butter. Thus the dealer had to invest very little — three or four 
dollars per tub. The result was that buying became very easy and 
dealers instead of storing the normal quantity that they were accus- 
tomed to sell to their trade began to speculate, buying for the sake 
of reselling to other dealers, who might go short. 



610 AGRICULTURAL ECONOMICS 

The question arises here, What became of the butter ? Obviously, 
one may think, it was consumed at higher prices, even if the consump- 
tion was accompanied by complaints at the high cost of living. Here 
again the existence of cold-storage houses served to cover the corre- 
sponding change in demand. The truth of the matter is that all of the 
butter was not consumed. To be sure, many consumers, unable to 
go without butter, kept on paying higher prices; but people to whom 
10 or 15 cents on a pound of butter means a great deal used less of 
it, at the same time accustoming their digestion to butterine and oleo- 
margarine. What then happened to the surplus supply of butter? 
The answer to this at once suggests the border line between the good 
and evil involved in the cold storage. The natural and the customary 
period for keeping butter in cold storage extends from July to the end 
of March. The output between March and the end of June is usually 
equal to the demand at customary prices. People then should have 
fresh butter during this period, and correspondingly cold storages 
should remain empty up to the end of June. Beginning with 1904 
these storing periods began to move forward at the end and backward 
at the beginning of the period. In 1909 there was plenty of storage 
butter at the end of April and new storing began exceptionally early in 
June; speculation kept the price for the fresh butter high enough with 
a view to the new storing season, so a smooth surface was kept on the 
butter market. It is obvious that a crash had to come, since carrying 
over butter from one season to another, even if possible from the 
point of view of preserving the butter in good shape, is a very risky 
enterprise, practicable only when the approach of a famine is certain. 
But such a conjuncture never actually takes place. Moreover, early 
butter, coming in during May and June, cannot stand storage. Thus 
the supply in one year was consumed at the expense of storing the 
supply of the coming year and so on until if it had not been for the 
crisis we should soon have reached the impossible situation of keep- 
ing a constantly increasing supply with correspondingly decreasing 
demands. Many dealers expected the crisis early in 1910 and lost 
heavily by being forced to pay high prices to speculators, who con- 
tinued to be optimistic. 

Other forces, too, were active in undermining the upward price 
movement. First come the substitutes. Butter was simply driven 
out from many markets, butterine took its place. Next in importance 
comes the question of importing butter from abroad. Maine, Ver- 



TRANSPORTATION AND STORAGE FACILITIES 611 

mont, Massachusetts, New Hampshire actually attempted to import 
butter from Canada, paying five cents duty per pound. But dealers 
discovered a more convenient way of fighting high prices; they 
imported cream and churned butter on this side of the fence, the duty 
on cream amounting to only fifty cents duty on thirty-five pounds 
of butter. All creameries on Prince Edward Island, for instance, 
closed their cheese factories in 1909-10 and shipped their cream to 
Boston. 

To conclude, the maximum price for butter is firmly determined 
on one side by the fact that the total yearly output must be consumed 
within one season and on the other by the possibility of imports and 
increased use of substitutes accompanied by a decreasing demand for 
butter. The difficulty in the years 1908-10 was that, owing to over- 
speculation and an unwarranted trade optimism, business men simply 
ignored the economic principles underlying the price mechanism. 
When, in January, 191 1, reports came that the total amount of butter 
in storage houses exceeded the previous year's storage provision by 
eighteen million pounds, a crisis became inevitable. This was pre- 
cipitated by the actions of speculators and the storage houses. The 
former, not having a definite retail trade to rely upon in disposing of 
a certain amount of their holdings, were the first to swamp the market. 
Outsiders to the trade, they cared little for stability and steadying 
measures which would have been adopted had the butter been in the 
hands of dealers. The latter would drop the price steadily, increasing 
consumption and thus avoiding trade demoralization. With the fall 
of prices, cold storages began to demand additional collateral from 
the dealers. One morning in January every dealer in Boston received 
a demand note from the Quincy Storage House to put up $2 per tub. 
They refused in a body to do this, the popular opinion being that the 
storages must stand by the dealers in a panic after having enriched 
themselves in the fat years. But the wave could not be stemmed 
any longer. Failure followed failure. The storage houses left with 
butter on hand began to throw their holdings upon the overloaded 
market. Dealers releasing butter at the rate of $16 per tub were 
glad to sell it at $12. It became evident that it would be impossible 
to dispose of the supply before new butter should commence coming 
in. Thus all the profits made within the preceding five years were 
wiped out only because dealers ceased consulting economies and were 
carried off their ground by the possibility of sudden fortunes. 



612 AGRICULTURAL ECONOMICS 

192. WAREHOUSING HELPS THE FARMER TO GET BETTER 

PRICES 1 

By EDWIN HOBBY 

The bankers' warehouse campaign in Texas has largely increased 
the permanent and dependable facilities for the storage of cotton in 
Texas. When this campaign began (June, 191 5) there were 400 ware- 
houses in Texas, having a total storage capacity of approximately 
800,000 bales. Today (December 7, 1915) there are completed or in 
course of construction in Texas, 628 warehouses, having an aggregate 
storage capacity of 1,500,000 bales. Thus it may be truthfully said 
that one result of the bankers' warehouse campaign in Texas has been 
to increase the number of cotton warehouses in the state by 228, and 
to increase the permanent dependable storage capacity of the cotton 
warehouses of the state by 700,000 bales. 

It is safe to say that as a result of the added warehouse facilities 
which the bankers' campaign has produced there are stored in Texas 
warehouses at this moment 800,000 bales of cotton, including that 
in storage at Texas ports, and that this amount exceeds by 300,000 
bales the aggregate number stored in warehouses within the state at 
the same period of any previous year. But for the warehouse facilities 
brought into existence by the bankers' campaign, it is safe to say that 
500,000 bales of cotton which are now held in storage would have been 
sold near the beginning of the cotton season. This cotton, if sold at 
that time, would have brought at the then market price approximately 
$20,000,000. Today it is worth at the present market price $30,000,- 
000, so that it would seem logical to say that as a result of the bankers' 
campaign in Texas $10,000,000 has been saved to the producers of 
the cotton now stored in warehouses, by enabling them to hold it 
until this time, to say nothing of the million bales of cotton held by 
farmers and merchants which are in open yards and in private 
storage. 

But this is only a part of the money-saving that has resulted to the 
cotton-producers and the people generally. The facilities which have 
enabled the people to store and hold 800,000 bales of cotton have at 
the same time increased the price of every pound of cotton that has 
been sold since the effects of this campaign began to operate, and it is 
safe to estimate that $45,000,000 have been saved as a result of this 

1 Adapted from an address at the Conference of Cotton States Bankers, New 
Orleans, December 6-7, 1915. Stenographic report of proceedings loaned by the 
secretary, Mr. Moorhead Wright. 



TRANSPORTATION AND STORAGE FACILITIES 613 

increase in the price of cotton which has been sold. Although the 
acreage reduction was an important factor, the prices would have 
continued below the cost of production in the event that the bankers' 
warehouse campaign had not been inaugurated, particularly after the 
British cotton contraband order became effective. 

But, valuable as the direct financial saving which has resulted 
from this campaign has been, this is dwarfed into insignificance by 
its great educational value for the future. This campaign has taught 
the people of Texas that cotton can be prudently and profitably 
stored in warehouses, has taught them how to do it, and has gotten 
them started to doing it. It has taught the cotton-growers, the 
homesteaders, and the tenant farmers what the benefits of cotton 
warehouse facilities are. It has taught them that when the cotton 
market is glutted or when it is closed by a money panic, as it was in 
1907, or by a world-wide war, as it was in 1914, they are not com- 
pelled, if adequate and dependable warehouse facilities are provided, 
to sell their crop for whatever price they can get from greedy and 
merciless speculators, but can deposit it where it will be safely and 
economically kept, and receive in return for their deposit a warehouse 
receipt upon which they can borrow sufficient money to meet the 
urgent needs which otherwise they would be compelled to sacrifice 
their year's product to liquidate. The most difficult phase of the 
movement to provide cotton warehouses in Texas has been that of 
inducing farmers themselves to understand the operation of a ware- 
housing system and to appreciate its value. It has been found 
extremely difficult to explain to a large element of the people how it 
was at all practicable or possible for them to pursue any other course 
in the fall of the year, than the time-honored course they have always 
pursued, of hauling their cotton to market, taking whatever price 
they are offered for it, and using the proceeds as far as they would 
go in meeting their inevitable obligations. It was difficult to con- 
vince them that a warehousing system would save them money, because 
they had never seen it worked, but it is not difficult now to convince 
any one of the thousands of cotton farmers in Texas, who, in Sep- 
tember, 1915, instead of selling his cotton at 8 cents a pound, the 
price he was then offered, placed it in a cotton warehouse, and bor- 
rowed money on his warehouse receipts to pay his pressing debts, and 
later sold this self-same cotton at 12 cents a pound. 



XI 
THE RENT AND VALUE OF FARM LAND 

Introduction 

But first, a word concerning distribution in general. 

The present chapter constitutes the beginning of a new division 
of our subject — the distribution of agricultural income. We have 
been examining, in chapters iii to x, the process by which wealth in the 
form of agricultural goods is produced. We have seen how the labor 
of the rural portion of our population, together with the assistance of 
such implements and appliances as they can secure, is applied to the 
resources of nature, for the purpose of producing certain plant and 
animal products. We have observed further how these producers of 
agricultural goods seek to market that part of their product which is 
converted into cash in such manner as to secure for it as high a price 
as possible. The ultimate aim is, of course, to make the farm enter- 
prise yield the largest total of wealth in return for the goods and effort 
put into it. 

But the enjoyment of wealth is a personal matter, and the indi- 
vidual is concerned about the way in which a private income for him- 
self is to be carved out of the total sum of wealth produced by the 
industry in which he has participated either by personal effort or by 
the use of property which he owns. Accordingly, we shall now, in a 
sense, retrace our steps and examine the relations of the several factors 
of the productive process from the point of view of the claims to income 
which are created by reason of the assistance which they have each 
contributed to the process. We shall inquire what claim the landlord 
is able to enforce upon the farmer who grows crops upon his land. 
Then we shall ask what percentage of the value of equipment the 
one who advances capital can require each year of him who uses it. 
Next, what of those who do the actual work ? The laborer, worthy of 
his hire — what wage is he able to collect ? And finally, what of the 
surplus profit which remains to be enjoyed, or of the ultimate loss 
which remains to be borne by the enterpriser who has been responsible 
for directing land, labor, and capital into these particular lines of 

614 



THE RENT AND VALUE OF FARM LAND 615 

endeavor ? In a word, how is the wealth produced in the course of 
our agricultural operations distributed to its joint producers ? 

The simple doctrine of rent as a differential return to superior land 
or natural agents of production is readily grasped. This, however, is 
hardly an adequate account of the matter, until technical produc- 
tivity is translated into full economic, i.e., value, terms. Granted 
that a tract of land possesses superior advantages of fertility, climate, 
or location, what shall be the market price at which the service of 
that land will sell? Evidently, the condition of the market for 
various classes of products will be one important factor. Prospective 
renters will contract to pay in proportion to what they expect to 
realize from their use of the land. Professor Taylor has clearly 
pointed out that that return will depend upon the character of the 
farmer as well as upon the character of the land, and selection 196 
suggests that the size of the producer's surplus out of which rent is 
paid may be increased by hard work and cheap living as truly as by 
skilful farming. Careful analysis of factors such as these will serve 
to reveal the schedule of demand for land use. The natural condi- 
tions of supply of land and natural resources were pretty fully set 
forth in chapter iii, and the circumstances which make of it an effective 
supply have been discussed in chapters vi, viii, and x. These factors 
in the making of the market price of land-use might profitably be 
identified and classified from selection 203. 

Nice distinctions must be drawn between economic rent, which is 
based on the idea of a "normal" return, and the commercial or 
contract rent which we meet in our business dealings. Not alone 
does commercial rent combine returns for the use of capital-goods 
along with true rent in a single payment, but the character of the 
renting contract is such as often to introduce conventional elements 
into the price of land-use, which considerably distort the price- 
making process. Section C furnishes numerous illustrations of this 
point. 

Section D should be studied with considerable care, and this for 
two reasons. First, an understanding of the process by which 
economic rent becomes the basis of the valuation of land will save us 
from getting the cart before the horse and attempting to explain the 
high cost of living by the high cost of farm land. In the second place, 
it should have the practical value of teaching the prospective buyer of 
land how to analyze the factors which go to make up both the present 



616 AGRICULTURAL ECONOMICS 

and the future value of a given tract, and thus buy and sell upon bases 
more rational than those commonly in use. A study of current prices 
of western fruit lands might be interesting in this connection. 



A. The Basis in Differential Return 

193. THE RICARDIAN DOCTRINE 1 
By DAVID RICARDO 

Rent is that portion of the produce of the earth which is paid to 
the landlord for the use of the original and indestructible powers of 
the soil. 

On the first settling of a country in which there is an abundance of 
rich and fertile land, a very small proportion of which is required to 
be cultivated for the support of the actual population, or indeed can 
be cultivated with the capital which the population can command, 
there will be no rent; for no one would pay for the use of land, when 
there was an abundant quantity not yet appropriated and, therefore, 
at the disposal of whosoever might choose to cultivate it. On the 
common principles of supply and demand, no rent could be paid for 
such land, for the reason that nothing is given for the use of air and 
water or for any other of the gifts of nature which exist in boundless 
quantity. If all land had the same properties, if it were unlimited 
in quantity, no charge could be made for its use, unless where it pos- 
sessed peculiar advantages of situation. It is only, then, because land 
is not unlimited in quantity and uniform in quality, and because in 
the progress of population, land of an inferior quality or less advan- 
tageously situated is called into cultivation, that rent is ever paid for 
the use of it. 

When, in the progress of society, land of the second degree of 
fertility is taken into cultivation, rent immediately commences on 
that of the first quality, and the amount of that rent will depend on 
the difference in the quality of these two portions of land. When 
land of the third quality is taken into cultivation, rent immediately 
commences on the second, and it is regulated as before, by the differ- 
ence in their productive powers. At the same time, the rent of the 
first quality will rise, for that must always be above the rent of the 
second, by the difference between the produce which they will yield 
with a given quantity of capital and labor. With every step in the 

1 Adapted from Principles of Political Economy and Taxation, chap, ii, §§ 24-27. 



THE RENT AND VALUE OF FARM LAND 617 

progress of population, which shall oblige a country to have recourse 
to land of a worse quality to enable it to raise its supply of food, rent 
on all the more fertile land will rise. 

Thus suppose land — Nos. 1,2, 3 — to yield, with an equal employ- 
ment of capital and labor, a net produce of 100, 90, and 80 quarters 
of corn. In a new country, where there is an abundance of fertile 
land compared with the population, and where therefore it is only 
necessary to cultivate No. 1, the whole net produce will belong to 
the cultivator, and will be the profits of the stock (capital) which he 
advances. As soon as population had so far advanced as to make it 
necessary to cultivate No. 2, from which ninety quarters only can be 
obtained after supporting the laborers, rent would commence on 
No. 1; for either there must be two rates of profit on agricultural 
capital, or the value of ten quarters must be withdrawn from the 
produce of No. 1, for some other purpose. Whether the proprietor 
of the land, or any other person cultivated No. 1, these ten quarters 
would equally constitute rent; for the cultivator of No. 2 would get 
the same result with his capital, whether he cultivated No. 1, paying 
ten quarters for rent, or continued to cultivate No. 2, paying no rent. 
In the same manner it might be shown that when No. 3 is brought 
into cultivation, the rent of No. 2 must be ten quarters, while the 
rent of No. 1 would rise to twenty quarters; for the cultivator of 
No. 1 would rise to twenty quarters; for the cultivator of No. 3 
would have the same profits, whether he paid twenty quarters for the 
rent of No. 1, ten quarters for the rent of No. 2, or cultivated No. 3 
free of all rent. 

It often, and indeed commonly, happens that before No. 2, 3, 
4, or 5, or the inferior lands are cultivated, capital can be employed 
more productively on those lands which are already in cultivation. 
It may perhaps be found that by doubling the original capital 
employed on No. 1, though the produce will not be doubled, will 
not be increased by one hundred quarters, it may be increased by 
eighty-five quarters, and that this quantity exceeds what could be 
obtained by employing the same capital on land No. 3. In such case, 
capital will be preferably employed on the old land, and will equally 
create a rent; for rent is always the difference between the produce 
obtained by the employment of two equal quantities of capital and 
labor. If with a capital of £1,000, a tenant obtain one hundred 
quarters of wheat from his land, and by the employment of a second 
capital of £1,000 he obtains a further return of eighty-five, his landlord 



618 AGRICULTURAL ECONOMICS 

would have the power at the expiration of his lease, of obliging him 
to pay fifteen quarters or an equivalent value for the additional 
rent; for there cannot be two rates of profit. If he is satisfied with 
a diminution of fifteen quarters in the return for his second £1,000, 
it is because no other employment more profitable can be found for 
it. The common rate of profit would be in that proportion, and if 
the original tenant refused, some other person would be found willing 
to give all which exceeded that rate of profit to the owner of the land 
from which he derived it. 

In this case, as well as the other, the capital last employed pays 
no rent. If a third £1,000 be employed on the same land, with a 
return of seventy-five quarters, rent will then be paid for the second 
£ 1,000, and will be equal to the difference between the produce of 
these two, or ten quarters; and at the same time the rent of the first 
£1,000 will rise from fifteen to twenty-five quarters; while the last 
£1,000 will pay no rent whatever. If, then, good land existed in a 
quantity much more abundant than the production of food for an 
increasing population required, or if capital could be indefinitely 
employed without a diminished return on the old land, there would 
be no rise of rent; for rent invariably proceeds from the employ- 
ment of an additional quantity of labor with a proportionally less 
return. 

The most fertile and most favorably situated land will be first 
cultivated, and the exchangeable value of its produce will be adjusted 
in the same manner as the exchangeable value of all other commodities. 
When land of an inferior quality is taken into cultivation, the 
exchangeable value of raw produce will rise, because more labor is 
required to produce it. The exchangeable value of all commodities 
is regulated, not by the less quantity of labor that will suffice for their 
production under circumstances highly favorable and exclusively 
enjoyed by those who have peculiar facilities of production, but by 
the greater quantity of labor necessarily bestowed on their production 
by those who have no such facilities; by those who continue to produce 
them under the most unfavorable circumstances; meaning by the 
most unfavorable circumstances, the most unfavorable under which 
the quantity of produce required renders it necessary to carry on their 
production. 

The reason, then, why raw produce rises in comparative value, is 
because more labor is employed in the production of the last portion 
obtained, and not because a rent is paid to the landlord. The value 



THE RENT AND VALUE OF FARM LAND 619 

of corn is regulated by the quantity of labor bestowed on its produc- 
tion on that quality of land, or with that portion of capital which pays 
no rent. Corn is not high because a rent is paid, but a rent is paid 
because corn is high; and no reduction would take place in the price 
of corn, although landlords should forego the whole of their rent. 
Such a measure would only enable some farmers to live like gentlemen, 
but would not diminish the quantity of labor necessary to raise raw 
produce on the least productive land in cultivation. 

194. THE RENT OF AGRICULTURAL LAND 1 
By F. W. TAUSSIG 

The typical case of rent, and the one which serves most readily 
to illustrate the principle, is that of agricultural land. Suppose that 
the producers at O, A, and B have farms of different fertility. A 
given application of labor and capital yields at O 25 bushels of wheat 
to the acre, at A 20 bushels, and at B 15 bushels to the acre. The 
price must be such as to make wheat-raising at B worth while; other- 
wise the total supply will not be forthcoming. The supply which 
can be raised at O and A is limited and an additional supply must 
be got at B before an equilibrium of supply and demand is reached. 
The price is high enough to bring normal returns to the producer at 
B for 15 bushels to the acre. The receipts from these 15 bushels also 
suffice to cover the expenses (including usual interest to capital) for 
the producer at A. The extra 5 bushels got from his land thus con- 
stitute an extra gain for him. Similarly the extra ten bushels at O 
yield an extra gain for the producer at O. And if the owners of A 
or O chose to let their lands, instead of cultivating for themselves, 
they could secure rents of 5 and 10 bushels to the acre (or the equiva- 
lent in money price). It is immaterial whether they secure the 
advantage from the better site in the one form or the other. 

Rent is sometimes said to be the specific product of land. Simi- 
larly, interest is often said to be the product of capital, and wages 
the product of labor; and thus three elements in distribution — wages, 
interest, rent — are set aginst three factors in production — labor, capi- 
tal, land. But this phraseology is to be used with caution. Labor 
applied in some ways (through the use of tools) yields more than labor 
applied in other ways; in this sense only is there a productivity of 

1 Adapted from Principles of Economics, II, 57-60. (Copyright by The 
Macmillan Co.) 



620 AGRICULTURAL ECONOMICS 

capital. The same language should be applied to land. Labor on 
some land yields more than labor applied on other land; in this sense 
only is there a productivity of land. If land were unlimited in supply 
and all of uniform quality, the natural forces inherent in it would still 
be directed and utilized by labor; and in this sense there would be a 
productivity of land. But there would be no differential return on 
any one plot of land, no emergence of rent, no notion of a separate 
productivity of land leading to rent. Rent arises because of the 
limitation of the better sources of supply; because of differences in 
the amounts brought forth by equal quantities of labor. 

Such is the fundamental principle of rent. But it requires many 
qualifications concerning the kinds and causes of difference in pro- 
ductive efficiency. Unless there were a tendency to diminishing 
returns from any one plot of land, there would be no such thing as 
rent. If the better sources of supply could be pushed indefinitely 
without any lessening of yield — if more and more labor and capital 
could be applied to a given plot of land, and could always bring an 
increase of product proportionate to the additional outlay — then those 
better sources of supply only would be resorted to. The less good 
lands would be left untouched, and all agricultural produce would 
be got from the best lands. The fact that good lands, mediocre lands, 
and poor lands are cultivated side by side, proves that at some stage 
a tendency to diminishing returns appears. 

When additional labor and capital are applied to cultivation, it 
may be a matter of indifference whether they be applied to poorer 
land or to the better land under poorer conditions. In the preceding 
discussion, three grades of land were assumed, having yields, for the 
same application of labor and capital, of 24, 20, and 15 bushels to 
the acre. But it might also be supposed that the three applications 
of labor and capital were all made on the same land, yielding succes- 
sively diminishing returns in the ratio of 25, 20, 15. In either case, 
the marginal product is 15. In either case, the 15 bushels constitut- 
ing the last instalment will not be brought to market unless the price 
is such as to make their production worth while; hence, in either case, 
the other instalments bring a surplus or rent. In either case, the 
margin of cultivation is that stage in production where only the normal 
returns to labor and capital are secured. The margin is said to be 
extensive when poorer land is resorted to; it is said to be intensive 
when more capital and labor are applied under less favorable condi- 
tions to the better land. Difference in yield would appear, and hence 



THE RENT AND VALUE OF FARM LAND 621 

a differential return, even though all land were originally of the same 
quality. 

Differences in situation have precisely the same effect 'as differ- 
ences in fertility. An apt illustration of the effects of situation (first 
elaborated by the German economist Thunen) is got by supposing 
all land to be of the same quality, and to be situated on all sides of 
a central city to which its produce is brought for sale. Imagine con- 
centric circles to be drawn about such a central point. Evidently the 
land in the nearer rings has an advantage over that in the more dis- 
tant rings. All the produce is sold in the central market at the same 
price; but that from the more distant land has to bear a higher cost 
of transportation, and its cultivator must be reimbursed for this. 
The owner of the nearer land has an advantage which causes rent 
to rise. 

The advantage due to situation is obviously less, the lower the 
cost of transportation. The cheapening of carriage in modern times 
has greatly diminished the importance of situation rent. This is 
strikingly the case for all agricultural produce — grain for example, 
which is easily transportable. Though refrigerating apparatus and 
fast freight facilities have made it possible to bring meat, fruit, vege- 
tables, and milk from very distant sources of supply, the nearer lands 
still have some advantage from situation. If, indeed, the rates of 
transportation should be the same for all distances, the advantage 
would disappear. The railways which bring the milk to some of the 
large cities of the United States adopted at one time the practice of 
a "postage stamp rate" — that is, an even charge on all shipments, 
distance being disregarded. So far as they carried out this method, 
advantages of situation, and consequently economic rent resulting 
from situation, were done away with for milk farms. As it happened, 
public authority was appealed to by the owners of the nearer lands 
to prevent this practice, it being alleged that it was unreasonable and 
unjust to fix rates without regard to distance. The Interstate Com- 
merce Commission sustained this contention and forbade the postage 
stamp rate; though prima facie it would seem to have been to the 
advantage of consumers, and not in violation of any sacred or inalien- 
able right of the nearer producers. 1 

1 The reader might well examine in this connection the issues which underlay 
the early Granger agitation, particularly in connection with "long and short haul" 
legislation. — Editor. 



622 AGRICULTURAL ECONOMICS 

B. The Nature of Competition for the Use of Land 

195. THE DIFFERENTIAL PRODUCTIVITY OF FARMERS 1 
By HENRY C. TAYLOR 

According to the textbooks on political economy which are gen- 
erally used in America today, rent varies in the same ratio as difference 
in productivity. By differences in productivity are usually meant 
differences in the value of the product of different farms of equal 
areas when cultivated with the same degree of intensity. It is appar- 
ently assumed that all farmers possess the same degree of efficiency, 
and that all land is cultivated with the same degree of intensity or 
else that variations in these respects do not make it necessary to 
modify the statement that differential rents are measured by differ- 
ences in productivity. It is the purpose of this paper to consider the 
influence of variations in the efficiency of farmers and in the intensity 
of culture upon the amount of rent which will be paid for the use of 
land, and to point out that because of these variations differential 
rent cannot be measured in terms of differences in productivity. 

The relative degree of prosperity to which the American farmer 
can attain is determined largely by his own efficiency. While the 
farmers who possess a relatively high degree of qualitative efficiency 
can win a larger return from land of any grade than can their less 
efficient competitors, this extra product due to superior ability is 
greater on the more productive than on the less productive land; 
and for this reason the more efficient farmers compete only for the 
more productive land, and pay more for it than the less efficient 
farmers can afford to pay. If, therefore, we measure differences in 
productivity in terms of the differences in the value of the products 
which the least efficient or marginal farmers could produce on the 
various grades of land under comparison, differential rents will be 
greater than differences in productivity. Inasmuch, however, as 
competition among the more efficient farmers for the more productive 
grades of land leads to a distribution of the land among the farmers 
in accordance with their efficiency — the most efficient farmers pos- 
sessing the most productive and the least efficient the least productive 
land in use — the differences in the actual yield of the different grades 
of land are greater than the differences in the yield which any given 
farmer could produce; and, since the better farmers could win, and 

1 Adapted from the Quarterly Journal of Economics, XVII (1903), 598-604. 



THE RENT AND VALUE OF FARM LAND 



623 



retain as personal profits, an extra product on the marginal land above 
what the marginal farmers can produce on such land, and must be 
allowed a profit equally large on the better land to keep them from 
outbidding the marginal farmers for marginal land and driving them 
out of the farming business, the differential rent will be less than the 
actual difference in the value of the product of the more productive 
and that of the marginal land. 




Fig. 



Let us suppose that the land which is necessary to supply the 
demand for a certain class of agricultural products, such, for example, 
as the products of the diversified agriculture of the corn belt, varies 
in productivity from A to B, that A grade land is twice as productive 
as B grade land, and that all other land under consideration is more 
productive than B and less productive than A grade land (see Fig. 1). 
Suppose, also, that all the farmers who are able to compete for the 
use of this land at a given time vary in efficiency from C to D (as 
represented in Fig. 1), that the farmer who has C degrees of efficiency 



624 AGRICULTURAL ECONOMICS 

is qualitatively twice as efficient as the one who possesses D degrees 
of efficiency, and that the other farmers are graded according to their 
efficiency from C to D, as the land is graded from A to B. The 
farmer who possesses C degrees of efficiency can produce twice as 
much on land of any grade as the farmer with D degrees of 
efficiency. The D grade farmer is the marginal farmer, and must 
receive enough on marginal land to cover costs, including a living. 
On the A grade land, which is twice as productive as the marginal 
land, he can produce twice as much with the same outlay, and is 
willing to pay a differential rent for it equal to one-half the 
product. 

Let us say that the D grade or marginal farmer's product on B 
grade land is valued at n (represented by line BD' in Fig. i), that his 
product upon A grade land is valued at 2n (represented by line AD), 
and that he is willing to pay a differential rent of n (line ED) for the 
use of A grade land. Then the value of the product of the C grade 
farmer, who is qualitatively twice as efficient as the marginal farmer, 
will be 2n (line BC') on B grade land and pi (line AC) on A grade 
land. Thus, while the C grade farmer can win an extra product 
valued at n (line D'C) on B grade land, his extra product on A grade 
land, above what the D grade farmer could produce, is valued at in 
(line DC). Hence the C grade farmer will not compete for B grade 
land until the rent on A grade land rises sufficiently to absorb half 
of this extra product, so that his personal profit will be the same on 
both pieces of land. Until rent rises to 2n on A grade land (that is, 
to point K in Fig. i, arid measured by line EK), the personal profit 
which the C grade farmer can win on such land will be greater than 
that which he could win from B grade land. If the differential rent 
of A grade land should rise to m (that is, to point K), the C grade 
farmer's personal profit on A grade land (represented by line KC) 
would be the same as that which he could win on B grade land (rep- 
resented by line D'C), being valued at n in either case. But, while 
the C grade farmer will pay a rent of 2n for A grade land rather than 
farm marginal land, the D grade farmer will take marginal land rather 
than pay more than n for A grade land. With the given hypothesis 
the differential rent of A grade land will not be less than n (measured 
by line ED), for the D grade farmer can afford to pay that much for 
its use. It will not rise higher than z« (measured by line EK), for 
the C grade farmer would then prefer marginal land, for which no 
economic rent is charged. 



THE RENT AND VALUE OF FARM LAND 625 

With all grades of farmers competing for the use of land, the 
differential rent of A grade land will be greater than n; for, at a rent 
of n, all but the marginal farmer will prefer it to inferior land, because 
the extra product, due to superior qualitative efficiency, is greater 
on the more productive land. Each farmer seeks to win the largest 
possible personal profit; and, as a result of competition for better 
land, rent will rise, until one by one the less efficient farmers find it 
preferable to take less productive land at a lower rent. The most 
efficient farmer can pay more for the best land than any of his com- 
petitors can afford to pay, and still receive a larger personal profit for 
his superior efficiency than he would receive from the less productive 
land at the lower rents which the less efficient farmers pay. Differ- 
ential rents will, for this reason, be greater than the differences in 
productivity when we measure productivity in terms of the value of 
the product which the land will yield when farmed by the marginal 
farmer. 

When each farmer has taken the land for which his degree of 
efficiency enables him to compete to best advantage, the marginal 
farmer will be found upon marginal land, the average farmer upon 
average land, and the most efficient farmer upon the most productive 
land. The product resulting from this most economical application 
of efficiency to productivity will be measured by the area ACD'B. 

The line XD f , which may be called the rent curve to distinguish 
it from the product curve CD' ', is drawn arbitrarily to illustrate the 
way in which rent will rise above line DD' . Point X will be some 
place between D and K, because, as has been shown, the differential 
rent of A grade land can neither be less than n nor more than 2ti. 
With continuous and regular gradation of land and of farmers this 
rent curve would be regular, but with irregular gradation of either 
factor it will be irregular. Thus the area EDD' (Fig. 1) represents 
the differential rent where all farmers have the same degree of effi- 
ciency as the marginal farmer, and the area DXD' represents the 
further differential which arises from variations in the efficiency of 
the farmers. These two constitute the differential rent which would 
be paid under the conditions laid down at the beginning of this dis- 
cussion; namely, equal amounts of labor and capital on all grades of 
land and perfect competition. 

The remainder of the surplus represented by area XCD' goes to 
the farmers as personal profits, the amount of personal profit received 
by a given farmer depending upon his relative degree of efficiency. 



626 AGRICULTURAL ECONOMICS 

196. WHEN THE IMMIGRANT COMPETES FOR LAND 1 
By H. A. Millis 

The influx of Japanese farmers into the Northwest has altered the 
terms upon which land is rented. Though all races are represented 
among the tenant farmers, and though the majority of the Italian 
gardeners lease the land they cultivate, the number of the white men 
coming to the several localities about Tacoma and Seattle and leasing 
land is smaller than formerly. There is in general among landowners 
an effective preference for the Japanese. They lease tracts of land 
and require little outlay on the part of the owner for houses and other 
improvements. In general they are more easily provided for than the 
members of the other races. Again, they more readily lease land and 
agree to reclaim part of it, though representatives of other races have 
made in the past and are now to a certain extent making such improve- 
ments for the landlord. Finally, the Japanese have been willing to 
pay more rent than the members of the various white races. Partly 
because of their strong desire to lease land the average cash rent per 
acre paid by them has greatly increased — from $13 . 15 per acre for 
land first leased to $20.63 P er acre f° r that now leased. The tracts 
leased are not the same in many cases, but it is believed that the figures 
given exaggerate but slightly, if at all, the rise which has taken place. 
Leases are found about Bellevue and Vashon Island where Japanese 
competition for land in the one year 1907 caused the rents paid to 
rise from $20 to $30 or more per acre. In several cases it was found 
that they were willing to pay more for the land than were the white men. 

The following instance is typical: Two white men were offered a 
30-acre tract at $10 per acre on the condition that they would remove 
a few stumps from one part of it. They declined the offer, and a 
Japanese took the tract, paying $400 per year and agreeing to clear 
it also. Occasionally, landowners, because of race prejudice, refuse 
higher offers from Japanese and rent to white men at lower figures. 
Such instances are rather exceptional, however. More and more of 
the farms are being leased to the Japanese. 

C. The Renting Contract 
197. CONTRACT OR COMMERCIAL RENT VS. ECONOMIC RENT 

It is evident that the lump sum which the farmer pays to his land- 
lord includes, in almost all cases at least, a payment for the use of 
certain capital-goods as well as payment for the use of land. Separa- 

1 Adapted from Reports of the Immigration Commission, Vol. XXIV, p. 508 • 



THE RENT AND VALUE OF FARM LAND 627 

tion of the two is, however, extremely difficult in the case of farming 
operations, though often quite obvious in connection with city prop- 
erty. The factory or store site renders no service save that of stand- 
ing room; the building plays a technological part in the industrial 
process quite similar to that of any other part of the mechanical equip- 
ment. The land is frequently held by one owner and the building 
by another. Under these conditions it is easy to distinguish that 
part of the whole payment which is to be credited to land as ground 
rent and the part which is to be figured as interest upon the cost of 
the equipment (building, elevators, boilers, shafting, etc.) placed upon 
it. In the case of the farmer who rents bare land to till or pasture, 
such payment as he makes is, evidently, pure economic rent. If, on 
the other hand, this land has been capitalized with fences, wells, 
houses, barns, irrigation ditches, and the like, it is obvious that part 
of what he pays must go for the upkeep and depreciation of these 
capital-goods and to pay the owner for the use of the capital which 
he has tied up in these forms. If it be part of the renting contract 
that the landlord shall furnish teams, implements, seed, and perhaps 
even the family living, the element of interest in the so-called rent 
payment stands out clearly. At the other extreme, fertilizer, tile 
drains, and irrigation works become so thoroughly incorporated into 
the land and its, productivity so inextricably bound up with their 
presence and operation that separation seems out of the question. 
As a result, we are practically forced to resort to the division used 
in law, and class together land and those things which are attached 
to it as fixtures, distinguishing this composite factor from capital- 
goods, which are movable. 1 

198. METHODS OF RENTING LAND IN IOWA 2 
By O. G. LLOYD 

In general, there are two systems of renting in use in Iowa, cash 
and share. An important difference between them is that a larger 
proportion of capital is furnished and a larger risk is assumed by 
the cash tenant as compared with the share tenant. 

1 Certain modern economists attack this problem in a somewhat different way, 
by viewing the lump sum as a composite rent payment, consisting of the rent of 
land and the rents of the various capital-goods which are leased with it under the 
renting contract. This raises difficult issues as to the actual basis of income and 
capitalization which it seems wisest not to bring into a book of this character. — 
Editor. 

2 Adapted from Bulletin 159, Iowa Experiment Station, pp. 174-7S. 






628 AGRICULTURAL ECONOMICS 

Under these two general systems, four different methods of rent- 
ing farms are followed, with modifications of each as a result of bar- 
gaining. In all the methods the landlord furnishes a house, a garden 
spot, and most of the permanent improvements. He makes the 
repairs of and the additions to the farm buildings and pays the taxes 
and insurance on all his property. On the other hand, the tenant 
generally furnishes all the labor, including work horses and machinery. 

Stock-share renting. — In stock-share renting the net receipts are 
divided equally. Essentially, the landlord furnishes the land, the 
tenant the labor, and they own in common the live stock raised for 
profit. The most usual method is for the tenant to furnish one-half of 
the live stock raised for profit and all the labor, including the work 
horses and machinery necessary to operate the farm. Work horses 
are fed out of undivided feed and the landlord pays the service fee 
and obtains a half interest in the colts. The landlord pays all the 
taxes and insurance on the real estate and one-half of the taxes and 
insurance on the personal property held in common with the tenant. 
Although each furnishes one-half the capital used in the purchase of 
feed, live stock, etc., it is quite common for the landlord to advance 
all the money. In the dairy regions, where more intensive farming 
is practiced, the landlord often furnishes all the dairy herd, including 
the bull. Where horses are raised chiefly for sale, the landlord prefers 
a half interest in them, while in those regions where horses are kept 
chiefly for their work, the tenant owns the horses and he is either 
forbidden to raise colts or the landlord takes a half interest in them 
by paying part or all of the service fees. 

The force of custom and the result of bargaining make many 
modifications in the contract, especially in the ownership of poultry 
and in the division of dairy, poultry and garden products. 

The highest per cent of share-tenants is found on the cheaper soil 
areas of the southern and northeastern parts of the state. Renting 
on shares includes stock-share renting, and this form of leasing, 
although radically different from crop-share renting, was included as 
share-renting by the Bureau of the Census. 

Cash renting. — In cash renting, a certain price per acre, or lump 
sum for the entire farm, is paid. As the tenant guarantees to pay 
the rent, regardless of the season, he assumes supervision of the farm 
and furnishes all the working capital necessary to operate it. Occa- 
sionally the landlord encourages the production of hay by furnishing 
grass seed, or he may furnish a manure spreader as an inducement to 



THE RENT AND ^ALUE OF FARM LAND 629 

the tenant to use the farm manure to the best advantage. Hay land 
is sometimes rented for two-thirds the price paid for grain land in 
order to encourage the keeping of live stock. The average cash rent 
js about $5 per acre. The landlord takes an interest in furnishing 
building material and repairs according to his desire to have live stock 
on the farm. The tenant usually hauls building material for perma- 
nent improvements and the tiles used in draining the farm. As a 
result of bargaining, many modifications are found. 

Share-cash renting. — In share-cash renting, a certain price per 
acre or a lump sum is paid for hay and pasture land and a share of 
one-third to one-half of the crop is given for the use of the grain land. 
The share going to the landlord varies with the productivity of the 
land and the certainty of getting a crop. The landlord furnishes the 
real estate and most of the material and skilled labor used in making 
necessary improvements. He pays the taxes on his property and 
occasionally furnishes part or all of the grass seed. The tenant fur- 
nishes all the working capital and labor used in operating the farm 
and pays all operating expenses, including all of the twine and thresh- 
ing bills. Owing to the heavy expenses of seed, twine, and threshing, 
the tenant generally pays a smaller share of the small grains than he 
does of corn. The contract usually calls for grain to be delivered at 
the nearest market, subject to the landlord's instructions. 

* Bushel renting. — In bushel renting, the tenant contracts to sell all 
his corn to the landlord at 15 cents per bushel. If the tenant furnishes 
all the working capital, the landlord agrees to pay him 20 cents per 
bushel for the corn. The tenant pays cash for a few acres of corn 
the landlord allows him for feed. In case the landlord permits him 
to raise any small grains, he pays one-half or two-thirds. Hay is 
seldom grown on bushel-rented farms. Where tenants furnish their 
own work horses they are compelled to erect most of the farm buildings 
themselves. 

On bushel-rented farms the landlord is a cattle feeder and wants 
the grain from the farm for his live stock. A central farm operated 
by the owner is usually down in grass and it is used partly for pasture 
in summer and for feeding purposes during the winter. By having 
one set of buildings on the central farm, the landlord is able to econo- 
mize labor and building material for the keeping of live stock. The 
landlord takes an active part in the supervision of the farm and often 
furnishes a large share of the working capital. He also advances 
credit to the tenant for living and operating expenses. While most 



630 AGRICULTURAL ECONOMICS 

of the corn raised on bushel-rented farms is fed on the land belonging 
to the landlord, the corn is hauled off the farms where it is produced 
and fed on a central farm, where one set of buildings is used for keep- 
ing all the stock. Generally, the manure is not returned to the land 
that produced the corn, but is hauled out on the land near the feed loi. 

199. TENANT SYSTEMS AT THE SOUTH 

a) IN MISSISSIPPI 1 
By E. A. BOEGER 2 

Three general systems of renting land, with many variations, are 
practiced in the Yazoo-Mississippi Delta, each of the systems having 
advocates among planters and among tenants. On large plantations 
all three of the systems are sometimes found side by side. The main 
points of the three systems are described in the following paragraphs: 

Half-and-half system (share croppers). — Under this system the 
tenant supplies the labor and one-half of the fertilizers, when any are 
used, while the landlord furnishes the land, a cabin, a garden plot, 
all the tools, the work animals and their feed, the seed, one-half of 
the fertilizers used, and the tenant's fuel wood, which the tenants cut 
from the nearest available woodland, using the landlord's mules for 
hauling. Each party under this system receives half the crop and 
each pays for his half of the ginning, bagging, and ties. If, as happens 
occasionally, another crop besides corn and cotton is grown, it is also 
divided equally between landlord and tenant. Cowpeas are fre- 
quently planted in the corn at the last cultivation with the seed 
usually furnished by the landlord. In this case all the hay, if cured, 
goes to the landlord. The tenant is often allowed to pasture it if he 
has a cow or other stock. The landlords exercise careful supervision 
over the share croppers, who are locally not considered as tenants at 
all, but as laborers hired to do the work in return for half the crop and 
the use of a cabin. 

Sometimes under this system the tenant pays cash for the use of 
the land not planted in cotton and for the use of the planter's equip- 
ment in working it. In such cases the tenant receives all the crops 
raised in this manner. 

Share renting system. — Under this system the tenant furnishes his 
own work stock and feeds it, and also supplies tools, seeds, and all 
labor, while the owner provides the land, the buildings, and the fuel. 

1 From Bulletin 337, United States Department of Agriculture, p. 6. 

2 E. A. Goldenweiser, joint author. 



THE RENT AND VALUE OF FARM LAND 631 

If fertilizers are used under this system, they are paid for in the ratio 
of each party's share of the crop. The tenant pays as rent a share of 
the crop, one-fourth in some sections and one-third in others. The 
use of the land in corn is sometimes paid for in cash and the tenant 
then retains all the crop. Each party to this agreement pays for 
ginning and bagging his part of the cotton. The landlord is interested 
in the crop and oversees the tenant's operations, but is not so much 
concerned about the economical use of mules and machinery, since 
they belong to the tenant. 

Cash renting system. — This system is similar to the share renting 
system, except that in lieu of a share of the crop the tenant pays a 
fixed rent per acre in cash or in lint cotton. Since the cotton is sold 
through the planter, he is sure of his rent provided a crop is raised, 
but since he cannot collect his rent if there is no crop, and since also 
the tenant is usually indebted to him for supplies advanced, the land- 
lord exercises supervision over the cash renters, except in the case of 
renters whom he knows to be dependable. 

b) IN TEXAS 1 
By CHARLES B. AUSTIN 

The kind of rent that is most common in the state of Texas is the 
rent known as the third and fourth, which means that the landlord 
furnishes nothing, or very little, in the way of teams or implements 
or working capital of any kind, and receives for the use of his land, 
houses, and barns one-third of the grain which is grown and one- 
fourth of the cotton. In case the tenant furnishes nothing except his 
labor, and all the capital is furnished by the land owner, the crops 
produced are usually divided equally. Cash rent is not paid in Texas 
so frequently as it is in other sections of the country, but it seems that 
cash rent is increasing in favor. Imitation and custom have been 
powerful forces in making the third and fourth rent almost universal. 
In the past few years, however, there has grown up the practice of 
either requiring, on the part of the land holder, or the offering, on the 
part of the tenant, some sort of a bonus in addition to the third and 
fourth for the use of the land. This bonus is either paid in cash or in 
other ways which will be discussed later on. We have information 
from certain communities where the bonus system began by the 
renters bidding against each other to acquire the more desirable 
places. It was quite natural that the land owners, rinding out that 

1 Adapted from Bulletin of the University of Texas, 1915, No. 21, pp. Sq-oo. 



632 AGRICULTURAL ECONOMICS 

certain renters were willing to pay something in addition to the third 
and fourth, soon began to demand the bonus, and there are now com- 
munities in which it would be difficult to place the responsibility for 
this bonus system. There has been recently a great deal of discussion 
concerning the iniquities of the bonus system. We shall not at this 
time enter into a discussion of the economic justness of the bonus, but 
devote our space to the words of the farmers who have written us 
concerning its payment. 

Falls County. — Will say that at least 65 per cent pay a bonus in first one 
way or another. Some pay in the way of high prices for dead old stock, 

and old second-hand tools and wagons They want to sell you a lot 

of high-priced stuff and rent to you, some the third all round, and some 
$1 . 00 per acre bonus for the privilege of letting you work clean land. This 
is mostly in the western part of Falls County, but sometimes it occurs in 
the mixed land, and in very rare cases it is the case in the sand. I myself 
have failed to get a place because I refused to pay standing rents. I per- 
sonally know one man who pays $100 bonus on 117 acres, and has been 
[doing so] for three years. I know another man who has five rent houses 
and works all on halves and requires them to pay a blacksmith's bill, and 
give him half the cotton and all the feed. I have known him for seven 
years, and he has never had a vacant house. 

Milam County. — The renters started the bonus in Texas themselves. 
I remember when the third and fourth was all the go and the renter thought 
he was paying too much, and he got the landowner to take money rent. 
Then the weevil came and the renter wanted the third and fourth again. 
He got it, then he began to pay a bonus to get the best homes and best land 
and matters got so tight for him he wanted to pass laws to stop the bonus, 
something he was to blame for himself. The tenants are to blame for most 
of their disasters. I know — for I have rented out land myself. 

Navarro County. — Fabulous prices have been paid for teams all over the 
county in order to rent places. I have known men to sell their teams and 
buy from landlords in order to get places. 

D. Land Values 

200. THE CAPITALIZATION OF RENT 1 
By RICHARD T. ELY 

To the individual who has a certain amount of money for which 
he is seeking the most profitable use, the question whether he shall 
invest it in land or other form of production goods is apt to be in itself 

1 Adapted from Outlines of Economics, pp. 359-60. (Copyright by The 
Macmillan Co.) 



THE RENT AND VALUE OF FARM LAND 633 

an unimportant one. If he chooses to buy land, it will be because 
he can get a satisfactory income from it, and he will very properly 
count the income as interest on the money he has invested in the land. 
If the income from the land increases, the selling value of the land will 
increase. From the point of view of our investor this will, of course, 
be an increase in the "capital value" of the land. It is important to 
note, however, that the land does not return an income simply because 
it is valuable. The process is the reverse of this. The land aids 
annually in the production of goods which command a price in the 
market; a part of the value of this annual product is imputed to 
the service of land and paid for in the form of economic rent; and 
the land is valued because it commands a rent. The value of the land 
is governed by its income-yielding power. 

This fundamental fact is apt to escape our notice because in the 
United States lands are more commonly sold than rented, so that we 
think of the value of lands as the price at which they will sell, rather 
than their annual value, or rent, although the first kind of value is 
derived from the second. In England, where lands are more com- 
monly rented, the value of land is usually thought of as its annual 
value or rent, while the selling value is often expressed as " twenty 
(or other number of) years' purchase," meaning twenty times the 
annual rent. The process by which the capacity to yield a certain 
annual income is made the basis for the determination of a certain 
selling price is termed "capitalization." In a country which is grow- 
ing in population and wealth, and where land rents are consequently 
increasing, the selling value of land is apt to be somewhat greater than 
a capitalization of the amount of income it is yielding at the time of 
the sale would justify. This is because the ownership of land carries 
with it the right to receive future as well as present incomes, and the 
prospectively larger future incomes are taken into account in the 
process of capitalization. On the other hand, the durability of land, 
the variety of uses to which it may be put, and the social prestige 
attached to land ownership cause the rate of capitalization, that is, 
the ratio of income to selling value, to be lower in the case of land in 
old established communities than in the case of most forms of capital 
goods. 



634 AGRICULTURAL ECONOMICS 

201. RENT RETURNS AND SPECULATION 1 
By O. G. LLOYD 

Through a long series of years the productive value of land will 
about equal its market price. In other words, the cash rent will pay 
a time deposit rate on the market price of land and the share rent 
will pay a mortgage rate. The risk and trouble of collecting a time 
deposit is certainly no greater than collecting cash rent. The invest- 
ment in farm mortgages and the collection of interest rates certainly 
afford no more risk and trouble than the supervision and collection 
of share rent. 

Most Iowa farm owners hold land primarily for profit and not for 
sentimental reasons. If they believed they could make more money 
by selling their farms than by holding them, they would sell the farms. 
This question was asked more than 800 farmers: "If you believed you 
could make more money in the city than in the country, how many of 
you would sell your farms ?" With but few exceptions, all said they 
would sell their farms if by so doing more money could be made. 

If most of the Iowa farm owners believed land would not advance 
in price, they would sell at the market price and put the money on 
interest. They could get 4 . 1 per cent on time deposits or 5! per cent 
on farm mortgages at a time when cash rent is 2 . 30 per cent and share 
rent is 4 . 28 per cent. At present the land owners believe the advance 
in the price of land will make up the difference between the cash rent 
and the time deposit rate, or between the share rent and the farm 
mortgage rate of interest. They prefer to hold their land on this 
speculative basis rather than sell at the market price and put their 
money out on interest. 

Proof that the element of risk is greater each year is shown in a 
decreasing cash rental rate, although the time deposit rate has 
remained about the same. For instance, according to reliable survey 
data, the cash rental rate for Iowa in 19 10 was 2 . 76 per cent; in 19 12 
it had fallen to 2 .30 per cent, while in 19 13 it was less than 2 . 20 per 
cent. In other words, the land had advanced in price more rapidly 
than the rent, and the difference between the productive value of land 
and its market price was becoming larger and larger. 

The question may be asked, "If the tenant is getting adequate 
returns, why is the per cent of tenancy increasing ? " 

1 Adapted from Bulletin 15Q, Iowa Experiment Station, pp. 166-69. 



THE RENT AND VALUE OF FARM LAND 635 

There are many causes, but the principal one is speculation. 
According to the census, the price of Iowa farm land advanced 118 
per cent from 1900 to 19 10, or more than doubled in market price. 
Owners continue to hold land for the increase in price, regardless of 
the low rental value. It has been a common occurrence for land to 
pay less than 3 per cent on the investment and within a year's time 
advance 20 per cent in price. An exceptional case is known of a farm 
changing hands five times during the year. Although the rent was 
less than 3 per cent on the first sale price of $65 . 00 and no improve- 
ments were made during the year, the last sale price of the land was 
$135.00 per acre. 

A rise in the price of land and an increase in the size of the farm 
business are two causes for an increase in tenant farms. When land 
rises in price so rapidly that the rent does not nearly pay a mortgage 
rate of interest, it is a question whether a tenant should attempt to 
buy land and pay the larger rate or remain a tenant until the two rates 
are more nearly equal. 

Information concerning the amount of farm tenancy was first 
collected by the census in 1880. At that time 24 per cent, or less than 
one-fourth, of the Iowa farms were rented. In 1910, 37.8 per cent, 
or nearly two out of every five, were rented farms. While farms 
managed by owners and managers decreased in size and number from 
1900 to 1 9 10, tenant farms increased in size 16 acres and in number 
2 . 9 per cent. Our data show that the highest per cent of tenancy is 
found on land that has risen most in price during the last ten years. 
Speculators who held the swamp lands of north-central Iowa as large 
stock ranches are now draining the land and dividing it into cultivated 
fields, which they rent to tenants. From $10 to $35 per acre has paid 
all expenses for tiling and outlet, and one year after draining, this 
black fertile soil has produced abundant yields of corn and oats and 
has continued to do so with only faint signs of depletion. This simple 
grain farming has required little supervision on the part of the land- 
lord and has paid immediate returns in grain rent, besides promising 
a large advance in the price of land. This is the area where most 
leases contain a sale clause and many tenants shift from one farm to 
another every year. Land is not owned as a home, but as an invest- 
ment, and the land is constantly on sale to the highest bidder. As a 
result, farms exchange hands frequently and the price of land is 
thereby artificially raised. 



636 AGRICULTURAL ECONOMICS 

The difference in the market price and the productive value of 
land is more evident when rental and interest rates are compared. 
Tenants make adequate returns for the use of their labor and capital 
because they pay a rental rate which is little more than half the mort- 
gage rate of interest. This rental rate enables them to make sufficient 
savings for the first payment on land, but if they were paying the 
mortgage rate as rental on the present market price of land they 
could not acquire ownership in a reasonable length of time. 

This unhappy situation is not necessarily due to the present 
interest rates. If these rates were lowered they would likely cause 
an advance in the price of land. The difficulty lies in the capitaliza- 
tion of the anticipated rise in land values. People are very optimistic 
concerning the future price of farm land and have added part of the 
future value to the present price. This has caused land prices to 
advance more rapidly than rent and resulted in widening the gap 
between the market price of land and its productive value as measured 
in terms of the difference between the interest and rental rates. 

If land were owned as a home and not as a speculative investment, 
the market price of land would more nearly equal its productive value 
and the rental rate would more nearly equal the mortgage rate of 
interest. The value of land would then depend on its annual produ- 
cing power rather than on its probable advance in price. Land would 
be valued according to the capitalization of its rent and would be low 
enough in price to enable the farmer to pay for it from the annual 
earnings of the land. 

Today the returns from the farm are divided equitably between 
the landlord and tenant and are sufficient to enable the tenant to 
acquire ownership of a farm in a reasonable length of time. The 
regrettable feature of the situation is the element of chance brought 
about by speculation, which could be abolished if more of the farmers 
regarded the farm as a permanent home, not only for the accumulation 
of capital, but as the best place to retire from active work. 

202. THE INFLATION OF LAND PRICES 1 

In these days we hear much talk about "back to the land" and 
"forward to the land." The proponents of these movements show 
us with alarm the exhibit from the census presenting the facts that 

1 From Report on Unemployment by the Commission of Immigration and 
Housing of California, December, 19 14, pp. 21-22. 



THE RENT AND VALUE OF FARM LAND 637 

during the decade 1900-19 10, while our rural population increased 
by 34.5 per cent, the population m towns of 2,500 or more increased 
81 .4 per cent, or nearly two and one half times as rapidly. During 
this same decade, the number of farms increased 21.6 per cent against 
an increase of 60 . 1 per cent in the population; the total farm acreage, 
however, decreased. Perhaps there is some good ground for their 
alarm. Perhaps a different situation might prove a relief in this 
problem of unemployment. The relative unattractiveness of the land 
is shown particularly in the case of white foreign born. Though 24 . 2 
per cent of our population in 19 10, they formed 28. 1 per cent of those 
living in towns and only 20.5 per cent of our rural population; and 
this in spite of the fact that most of our immigrants come from rural 
districts in Europe. 

We believe that the cause of this phenomenon is to be sought in 
the unwarranted high price of agricultural land, too often based upon 
speculative valuation with no regard to its productivity, and upon the 
lack of organization among our farmers, leaving each to wage his 
battle for credit and markets alone and single-handed. 

A few weeks ago, when several enthusiasts advocated bringing 
oppressed Belgians into this state, Mr. Gavin McNab, the proponent 
of the scheme, was quoted in the San Francisco Bulletin of October 2 1 
as saying, "Too long the custom has been to place speculative values 
on the land in this state and thus prevent the taking up of certain 
sections by investors." In the same issue, Mr. A. S. Baldwin, of the 
firm of Baldwin & Howell, was quoted: "The main difficulty in work 
of this kind is that in colonization the land is figured so far in advance 
of its true value that the farmer is beset with troubles from the outset. 
There is tpo much greed among the landowners in most of these 
colonization projects. Also exorbitant commissions are paid for pro- 
motion, with the result that the settler finds himself saddled with the 
tremendous burdens." 

Colonel Harris Weinstock, in an address delivered November 11 
before the California State Fruit Growers' Convention at Los Angeles, 
said: " Great fortunes have been expended throughout the nation and 
elsewhere, inviting people to engage in California agriculture and 
horticulture, but our methods have been so crude and so unscientific 
and the love of greed on the part of land promoters has been such, 
that a very great proportion of those who have been induced to come 
here, and to buy our acreages, have failed, with great misfortune to 
themselves, and with serious injury to the state. Such persons have 



638 AGRICULTURAL ECONOMICS 

been forced back to the cities, many of them as unskilled laborers, to 
swell the ranks of the casual unemployed, and many of them have 
cursed the state as a delusion and a snare, have shouted their mis- 
fortunes from the housetops, and have thus injured California in the 
eyes of their sympathizers here and elsewhere." Evidence of this sort 
could be cited ad infinitum. 

There seems to be no one who would take the case against those 
who advocate making easier and more attractive the approach to the 
land. The farm is the natural outlet for our overcrowded cities. It 
is out of the rural districts that we must hope to get the backbone of 
our citizenry. Almost all proposed unemployment solutions that 
pretend to thoroughness look to the land for relief. 

Assuming the desire to get on the land, along with the means and 
ability, the first requisite is a knowledge of available holdings. Today 
practically all information of this sort is compiled by railroads, cham- 
bers of commerce, boards of trade, or the promoters of some land pro- 
ject. These are naturally interested parties. There is nothing to 
show the prospective purchaser just how much and wherein he should 
discount their enthusiasm. 

We should like to see a state land bureau, to supply at cost to 
prospective purchasers all needed information regarding the best eco- 
nomic uses of land, its value, approaches to market, and the like. It 
is more essential to start the settler right than to guide him after he 
may have taken up an almost impossible proposition. Closely related 
to the work of a state land bureau is a comprehensive land law that 
will make more difficult fraud and misrepresentation in the sale of 
rural lands, and that will bring to speedier justice the violators of the 
same, and give equity to the exploited. We have our regulation of 
weights and measures, and our pure food laws, but it is of vastly 
greater importance to the community as a whole that the prospective 
purchaser of farm lands be protected, both against exploitation and 
against his own ignorance. The enforcement of such a law might be 
given over to the proposed state land bureau. 

203. CAUSES AFFECTING FARM VALUES 1 
By GEORGE K. HOLMES 

Farm real estate in the United States has gained in value in such 
a degree since the census of 1900 that an examination of the causes of 
this gain may be not only interesting, but instructive, to the economic 

1 Adapted from Yearbook of the Department of Agriculture, 1905, pp. 511-21. 



THE RENT AND VALUE OF FARM LAND 639 

student as well as to the practical agriculturist. The highest per- 
centage of increase, 40.3 per cent, was found in the South Central 
group of states, and close after that 40 . 2 per cent in the Western 
group. Third in order is the South Atlantic group, with 36 per cent, 
while a close fourth place is held by the North Central States with an 
increase of 35.3 per cent. The lowest increase of the five groups of 
states into which the country is divided in the census reports occurred 
in the North Atlantic states, where it is 13.5 per cent. 

The rate of increase for cotton farms is highest — 48. 2 per cent. 
Second in order are the hay and grain farms, with an increase of 35 
per cent; the live-stock farms increased in value per acre 34.3 per 
cent, and the farms devoted principally to sugar are found to have 
increased 33 . 2 per cent. Rice farming follows with an increase of 
32.2 per cent in value per acre, while close to this is 32. 1 per cent 
for tobacco farms. The farms having no special sources of income 
have an increase in value per acre amounting to 30 . 1 per cent, below 
which are the fruit farms with an increase of 27.9 per cent, the vege- 
table farms with 26.7 per cent, and, lowest of all, the dairy farms 
with an increase of 25.8 per cent. 

EXPLANATIONS OF INCREASES 

From every agricultural neighborhood in the United States expla- 
nations have been received of the increases and decreases in the real 
estate value per acre of medium farms during the last five years. 
Subject to some qualifications, the general principle is that the farm 
land itself has become more highly capitalized by a larger amount of 
net profit per acre. Only the main features of the analysis can be 
given in this article. 

In the general matter of price of farm products farming had long 
been performed under disadvantages that were often discouraging 
until a few years ago. With now and then a year of exception in 
favor of this or the other crop it has been a general fact that prices of 
farm products, long previous to these recent years, have fallen too 
near the full economic cost of production, which is considerably larger 
than the immediate cost of production and includes many items 
generally overlooked by farmers. Indeed, it is quite certain that the 
prices have at times fallen below the full economic cost of production, 
of which the most conspicuous illustration was afforded seven years 
ago, when the price of cotton fell to 4 J cents per pound, or even lower. 
at the plantation. 



640 AGRICULTURAL ECONOMICS 

In 1905, at the end of the five-year period covered by this investi- 
gation, the prices of farm products have risen out of the depths to 
which various causes had previously sunk them, so that the farmer 
is at last getting a fair net return for his labor and farming operations 
in most products. This is naturally reflected in the higher capitaliza- 
tion of agricultural land. This conclusion is not advanced theoreti- 
cally, but is amply sustained by the reports of many thousands of 
correspondents in all parts of the country and for all classes of farms for 
which there has been a considerable increase in price of products. 

One can well realize how directly the availability of cheap public 
land suitable for farming has depressed the value of old agricultural 
land and kept from rising to its otherwise natural level the value of 
newer land taken into cultivation, upon reading the statements of 
many correspondents, particularly in the agricultural margin near the 
land recently acquired from nation, state, or railroad. The national 
land that can be utilized agriculturally is now reduced to about 
300,000,000 acres, but nearly all of this is suitable only for grazing, 
since it cannot be used in dry farming nor under irrigation. 

While the public land suitable for farming has been reaching 
exhaustion the flow of immigration from foreign countries and from 
the older parts of this country has been continuing in its direction, 
and where no farming land could be obtained from nation, state, or 
railroad the influx of agricultural people was halted in regions where 
farms had been established in more recent years, and the consequent 
pressure of new demand upon a fixed area increased the value per 
acre during the five years often as much as 50 to 100 per cent. 

Along with the general causes that have elevated the price of farm 
land during the last five years should be mentioned the diminishing 
rate of interest. So great in the aggregate have been the savings of 
the farmers and persons in other occupations in the North Central 
states and in other sections that a large amount of these savings has 
sought investment in farms, even to the extent of raising farm value 
and diminishing the rate of interest, so that an advance of the price 
has followed often with no increased net profit per acre. 

In the cotton belt the abolition of the crop lien in consequence of 
profitable prices of cotton has worked a greater economic revolution 
than has taken place in any other part of the country or for any crop 
other than cotton. When the cotton planter ceased to pay an 
extremely high rate of interest for an advancement of supplies — 
estimated at 40 per cent fifteen years ago — and became able to sustain 



THE RENT AND VALUE OF FARM LAND 641 

his plantation with his own capital, as he did three years ago, and 
was often able to retain a large portion of his cotton for sale at a time 
when most to his own advantage, his land was at once converted into 
an economic stronghold and appreciated in value in a greater degree 
than the land devoted to any other large crop. 

In the North Atlantic states, and in a less degree in other groups, 
there has been some back pressure upon the land from the cities. In 
some regions the old abandoned farms are becoming the country 
homes of city families, and are passing back into some sort of cultiva- 
tion and production. 

It would by no means be fair in the explanation of increase of 
farm values during the last five years to confine it to increases in price 
of products and to pressure of demand upon area. Very large effects 
have been derived from better cultural methods; from the substitu- 
tion of profitable for unprofitable crops; by the adoption of more 
intensive culture and crop; by better applied labor; by larger and 
cheaper facilities for reaching markets; and by some improvements 
in the business features of marketing products. Each one of these 
causes is of large account and all together combine to make the net 
return per acre larger than it was five years ago by an amount 
sufficient to raise the capitalization of farm lands in a considerable 
degree. 

The values embraced in this investigation include improved and 
new buildings and all improvements upon farms. In many cases 
correspondents have reported a large percentage of increase in farm 
values per acre where the increase was almost entirely due to added 
improvements in the way of better dwellings, new barns, improve- 
ments in old barns, new granaries, and new buildings for the protec- 
tion of live stock in winter. 

Throughout extensive areas there have been great additions to 
land values as the result of draining by tile and open ditches, and the 
latter are sometimes so large as to be called canals. Increases have 
resulted from the removal of the stumps of forest trees and the 
construction of new or better boundary fences. Better and more 
durable roads on the farm and between the farm and its market 
town or railroad station have had a distinct effect upon the farm 
values. 

Along with numerous improvements, not all of which can be men- 
tioned here, stands forth the improvement of the soil itself. There 
is a materially increased production of live stock, with the resultant 



642 AGRICULTURAL ECONOMICS 

increased acreage of forage and grain crops which in rotation produce 
farm manures, humus, and rest; enrich the soil, as with nitrogen 
brought by legumes; and improve the mechanical condition of the soil 
for all crops. In regions needing commercial fertilizers, nitrogen, 
phosphorus, potash, and lime have been used more abundantly and 
more intelligently, and on crops bringing better prices. 

farmers' new economic independence 

A matter of great importance in its bearing upon the increased 
value of farm lands is the new economic independence of farmers, 
fundamentally growing out of their improved financial condition. 
Farmers now occupy a strong economic position, founded upon the 
tendency of the consumption of some important products to increase 
faster than population does, and upon the tendency of the desires for 
these products to increase faster than the production does, so that 
with respect to these products consumption is close upon the heels 
of production. 

It may seem a matter of small consequence to mention poultry 
and eggs as an instance, but it should be remembered that the price 
of eggs has been high and growing higher for several years, because 
consumers have wanted more eggs than have been produced. Butter 
is another product that tends to underrun consumption. The highest- 
priced butter in the world in its home markets, taking first and fancy 
grades and ignoring specialties in other countries too small for notice, 
is found in this country. With regard to milk and cheese also the 
economic position has become stronger. 

The annual products of dairying, of fruit and vegetable raising, 
and of poultry keeping aggregated nearly $2,000,000,000 in farmers' 
hands in 1905, or three- tenths of the gross value of all farm products; 
and these particular products belong to the class of those for which 
there is a tendency of demand to be greater than supply. In the case 
of none of these products is there a desired quantity satisfactory in 
quality obtainable by consumers at moderate prices. The public is 
underfed in the higher grades of these luxuries of the farm. 

Meat animals, too, are establishing themselves in a stronger posi- 
tion in favor of the farmer, because of the tendency of population 
increase to outfoot the increase of these animals; but this statement, 
although true under natural conditions, may become subverted in its 
application to this country by the prohibitive legislation of importing 
countries. 

; 



THE RENT AND VALUE OF FARM LAND 643 

In wheat production also the farmers of this country are in a 
position that is at least moderately strong. Canada and Argentina 
may stand in the way of a more advantageous position for a dozen 
years or so, but in the meantime the increasing demand of the world 
for wheat promises to the wheat grower that he shall not again suffer 
from the consequences of overproduction. 

The foregoing lines of evidence converge upon the conclusion, 
which is now apparent in all parts of the United States, that in his 
new economic independence the farmer is now more than ever before 
free to choose his crop, and this is a matter of tremendous importance. 
This removes obstacles to the rotation of crops and to intensifying 
culture and methods. It gives the farmer ability to raise leguminous 
crops, with their important benefits to the soil. It enables him to 
multiply his domestic animals, with further consequences upon tillage 
and land fertility. It enables him to adapt himself to his best markets 
with the best crops. 

The agricultural situation just indicated is very appreciably 
reflected by increased land and improvement values. 

MINOR DECREASES IN VALUE 

While the net result of changes in the average acre- values of farms 
in the last five years has been a marked increase for the whole country, 
decreases have been found within small areas, and these should not be 
lost to view in the grandeur of the counter-movement. 

The migration of farmers' sons to town and city, to industry, 
trade, and transportation — a common fact especially apparent in the 
North Atlantic and North Central States — is throwing farms upon 
the market for sale, and this occurs sometimes in neighborhoods 
where there is no immigration and little, if any, local demand for farm 
lands. The unavoidable result is that in such neighborhoods farms 
have decreased and are still decreasing in value. 

Probably no cause of depreciation of farm values is so frequently 
mentioned in nearly all parts of the country as the scarcity and deterio- 
ration of farm labor. The reports on which this statement is based 
generally refer to wage labor, but the scarcity is found, though less 
prevalently, in the supply of tenant labor also, particularly that of a 
trustworthy sort. 

A cause of depression in farm values in many places in the North 
Atlantic states is the continuance of crop production which meets the 



644 AGRICULTURAL ECONOMICS 

competition of the prairie farms. There is a considerable fraction of 
farmers who are "in a rut" and seem lacking in adaptability to new- 
conditions of competition, and more particularly to new market con- 
ditions which have grown up around them and which are guaranteeing 
a profit to the producers of such crops as can be supplied directly by 
them to near-by consumers, or perhaps with small intervention by 
middlemen. 

Another cause of decrease in farm values, but one that alternates 
with causes of increase, is unfavorable weather — too much or too little 
rain, devastating freshets, parching droughts, excessive or deficient 
sun heat, frosts that are too late in the spring or too early in the 
autumn, or severe winter freezes in a latitude not accustomed to them. 
Such unfavorable weather conditions depress the value of farm real 
estate, even though they have continued for no longer than one year; 
and when they have continued for two or three years the depression 
in values is extreme. In such cases there is an eventful recovery, 
sometimes promptly within a year and sometimes within a few 
years. 

Some depressions in price have been in evidence during the five 
years under review. The tobacco crop in some of its varieties has 
suffered in this respect for several years and this in the face of station- 
ary if not diminishing production. The owners of tobacco farms in 
some counties assert that the value of their lands has decreased 
within five years because the offers to buy tobacco have come solely 
or mostly from one buyer, who would take the crop only at his 
own price. 

In the case of the extraordinarily large rice crop of 1904 also there 
was a diminished price which at once made itself felt in diminished 
land values as compared with those of the preceding year, although 
during the five-year period there was some increase. 

The marked drop in the price of cotton in December, 1904, from 
which there was no full recovery until half a year after, diminished 
the aggregate value of cotton plantations and farms by many millions 
of dollars while the lower price continued. So it happens that farm 
land values are as sensitive to lower and low prices of products as they 
are to higher and high prices. 

In preceding paragraphs are given the more frequently mentioned 
causes of depression in farm values during the last five years, but these 
causes are not generally prevalent and are often highly localized and 
specifically restricted. 



THE RENT AND VALUE OF FARM LAND 645 

204. VARIOUS FACTORS AFFECTING THE VALUE OF LAND 1 

By L. W. ELLIS 

The mean average acre valuation of bare land for 21 Ohio farms 
studied by the United States Department of Agriculture is $45.96. 
For farm 1 the acre valuation of bare land is $61 . 62. For farm 2 it is 
$19.53. These are both dairy farms in the northeastern part of the 
state. Farm 1 is i§ miles from town, on a stone pike, while farm 2 is 

5 miles out, on a dirt road. Farm 4, with an acre valuation of $31 . 15, 
and farms 8, 9, and 10, with acre valuations of $87 . 74, $65 . 99, and 
$71, respectively, are all level farms. No. 4 needs considerable 
drainage. Nos. 8, 9, and 10 are well equipped with tile drains. 
Nos. 8 and 10 show high percentages (74 and 84.2, respectively) of 
land in crops, as compared with the mean average of 52.8 per cent 
for the 21 farms. Farm 25, with 91.9 per cent of land in tilled crops, 
and situated within a stone's throw of an interurban railway, shows a 
bare-land valuation of $40 . 10 per acre. This farm, however, lacks 
tile drainage and is overequipped with buildings as compared with 
other farms. Farm 3, with an acre valuation of $41.44, has a very 
expensive building equipment, and even when the latter is placed at 
a very low figure as compared with its cost it leaves a low figure for 
bare land. Farm 14, although the largest of all, with a total of 
388 . 92 acres, has but 50 . 7 per cent of the land in crops. It contains, 
however, a large acreage of productive bottom land, has a low building 
investment per acre, and has good roads to a shipping point, so that 
the bare land has an acre valuation of $60 as compared with the 
average of $45.96 for the 21 farms. Farms 20, 21, 22, and 23, with 
bare-land valuations of $43.97, $22.26, $25.55, an d $29.59, respec- 
tively, are all located in the hill section (southeastern part) of the 
state. No. 20 (valuation $43.97) shows an unusually low area in 
waste and timber land for a hill farm and is connected with town by 

6 miles of pike road. No. 23 (valuation $29.59), with nearly the 
same area, distribution of acreage, and distance from railway station, 
is separated by 3 miles of hilly dirt road from the pike leading to town. 
No. 21 (valuation $22.26) has considerable waste and timber land. 
Farms 12 to 17, inclusive, range in bare-land value from $43.00 to 
$64.89; these farms are well equipped with buildings and are easily 
reached by pike roads from good towns. Most of them show a 

1 Adapted from "A Study of Farm Equipment in Ohio," Bulletin 212, Bureau 
of Plant Industry, United States Department of Agriculture, pp. 12-13. 



646 



AGRICULTURAL ECONOMICS 






higher percentage of crop land than the mean of the whole number 
and are in a high state of productivity. Farm 24, with a bare-land 
valuation of $19.61, is located in a rougher section in southern Ohio, 
is underequipped in buildings, and is conservatively valued rather 
than otherwise. 

From these examples the land values due to good roads, good 
drainage, high percentage of crop areas, good topography, and ade- 
quate improvements can be plainly seen. 



XII 
LAND TENURE AND LAND POLICY 

Introduction 

Ever since the time when Lot's herdsmen quarreled with the herds- 
men of Abraham for possession of the most favored portions of the 
plain of Jordan — and, doubtless, long before that — men have striven 
endlessly over the right to use land and to enjoy its benefits. The 
Gracchi found the land problem acute in Latium, but were unable to 
effect a solution of it. The feudal tenure of the Middle Ages was but 
a makeshift adjustment, suitable to the days of political turmoils. 
For a brief time it seemed that, in America, our ideals of liberty and 
equality were to attain, by the grace of free land, to a tolerably close 
approximation of economic as well as political democracy. But the 
early passing of the public domain which was supposed to be prac- 
tically inexhaustible forces our generation to turn from the illusory 
hopes of yesterday to the stern necessity of making our rent usages 
and land laws such as shall secure the most effective utilization of a 
productive agency strictly limited in supply. 

This "most effective utilization" means not merely tillage prac- 
tices which are technically correct as applied to the land itself, but 
also such adjustments of the relations of human contract involved 
as shall secure the largest measure of co-operation on the part of 
labor and capital, and most intelligent direction of the whole pro- 
ductive process. The readings in Section A serve to indicate how 
intimate a relation maintains between the forms of tenure and the 
quality of agriculture. Another phase of the same matter might be 
illustrated by pointing out the minimum amount of agricultural 
utilization which is made of landed estates in England and of the 
country places of many American millionaires. 

But, granted a satisfactory result in terms of production, what 
of the terms upon which this product shall be divided? It is not 
merely the formal question of rent, as discussed in our previous 
chapter, because most landlord-tenant relations involve the use of 
capital of various forms and the furnishing of supervision or even of 
labor by the one whom we speak of as only a landlord. The situation 

647 



648 AGRICULTURAL ECONOMICS 

resolves itself practically into a working partnership, and the success 
and permanence of the business depend upon arriving at a basis of 
division which shall induce both parties to put forth their best efforts 
and to work in harmony. Selection 210 indicates one method by 
which such team work has actually been achieved. 

It is evident that the statistics of tenancy in the United States 
admit of various interpretations. In selection 211 Dr. Stewart 
illuminates an old discussion by reducing the figures to an acreage 
basis. Section C presents both complacent and alarmist views of 
farm tenancy, and Section D offers both radical and conservative 
plans of land reform. 

A. Effects of Tenure on Farm Operation 

205. THE RELATION OF TENURE TO THE QUALITY 
OF FARMING 1 

By O. R. JOHNSON 2 

A farm management survey of four townships in Johnson County, 
Missouri, indicated that owners and part owners kept more livestock 
on the land, than did tenants. The latter kept one animal unit for 
every 5J acres of crops, whereas the former kept one for each 4J acres. 
The effect of this difference upon the ultimate fertility of the land is 
evident. The matter may be viewed from another angle by studying 
the distribution of crops on the various classes of farms. Owners 
devote more land to pasture and meadow than do tenants. The 
tenant grows a half more corn than the landowner, nearly twice as 
much wheat, and about the same percentage of oats and hay. Wheat 
is the most important money crop of the region and is more popular 
with both part owners and tenants than it is with farm-owners. 

Table IX shows the effect upon crop yields of the system of rental 
practiced in the region under consideration. Where a tenant can 
rent land for but one year at a time he must, of necessity, devote most 
of his attention to grain farming and he will consequently grow those 
crops which can be most readily turned into cash. This can lead to 
but one result — the result shown in Table IX. The tenant farms are 
much lower in yields. A difference of about 15 per cent in the yield 
of corn is noticed in tenant farms compared to farms operated by 
their owners with a somewhat smaller difference for wheat and a 

1 Adapted from Bulletin 121, Missouri Experiment Station, pp. 69-74. 
I 2 W. E. Foard, joint author. 



LAND TENURE AND LAND POLICY 



649 



difference of about one-third for oats. This illustrates the greatest 
evil of the present system of land tenure. The fact that a tenant 
has no assurance that he can remain on a farm for a longer period than 
one year is mainly responsible for the condition. 

TABLE IX 
The Effect of Land Tenure upon Average Yields 



Crop 



Yields 



Owners 



Part Owners 



Tenants 



Corn 

Wheat 

Oats 

Cane 

Cowpea hay 
Timothy... . 

Clover 

Mixed hay . . 



38.3 bu. 

18.8 bu. 

33.2 bu. 
2 . 5 tons 
1 . 15 tons 
1 . 03 tons 
1 . 00 tons 
1 . 1 1 tons 



36.3 bu. 

17.2 bu. 

28.3 bu. 
2 . 4 tons 
1 . 08 tons 
1 .01 tons 

.97 tons 
1 . 05 tons 



9 bu. 
4 bu. 
4 bu. 

6 tons 
88 tons 

07 tons 
91 tons 
16 tons 



Again, with tenant farmers, one man handles considerably more 
land than in the other classes. Likewise he handles a greater acreage 
with each work horse. The owner keeps more equipment than any 
other class of farmers. With tenants especially this usually means 
that they do not have as much equipment as they should have for 
greatest efficiency. However, less equipment, coupled with a greater 
number of acres per man and horse, will naturally make the tenant's 
expenses considerably less than those of the other classes. 



table x 

Labor Incomes on Farms Operated by Owners, Part Owners, and Tenants 





272 
Owners 


218 Part Owners 


179 Tenants 


Average 




Landlord 


Operator 


Landlord 


Operator 


of 669 
Farms 


Capital 


$12,555 
1,800 
858 
942 
628 
314 
167 
481 
413 

68 


$3,940 

247 

22 

225 

5-7% 


$7,633 
1,763 
925 
838 
382 
456 
172 
628 
418 

210 


$8,378 

494 

64 

430 

S.13% 


$i,547 
1,200 
622 
578 
77 
501 
144 
645 
354 

291 


$n.53i 
1. 841 


Total receipts 


Total expenditures 


S42 




999 
577 
422 
163 
585 
399 

1S6 


Interest on investment 


Products used in home 






Gross labor income 






Family living 






Farmer saves in addition to 
interest 















Table X shows the comparative efficiency of the three classes of 



farm operators. 



The average labor income of a farm owner was 



650 AGRICULTURAL ECONOMICS 

$314, that of the part owner $456, approximately 50 per cent larger, 
and that of the tenant $501, nearly 70 per cent larger than that of 
the landowner. The average labor income for the region is $422. 
Another interesting point in this connection is the fact that the man 
renting land to a landowner received 5 . 7 per cent on his investment 
while a man renting land to one who owns no land received only 
5 . 1 per cent. This may be explained in two ways. The land rented 
to a part owner is usually nearly all tillable and is therefore all farmed. 
This would naturally be expected to return more than one rented 
where a portion of it is waste land, building block, etc. Another factor 
which might influence this difference is the fact that tenant land does 
not usually receive the care that land farmed by a landowner would 
receive. There would probably be some crops pastured down by an 
owner who has stock, while a tenant does not have such an oppor- 
tunity. : 

Ano.xier point which should be mentioned here is the difference 
between labor income before products used in the home are credited 
to the farm and after these products are credited. A little more than 
one-third of the owner's actual income was in products which the 
farm furnished him. By "farm products" here is meant the vege- 
tables, fruit, poultry, and dairy products and any meat furnished the 
household from the farm. To show what the operator actually 
receives from the farm, it would be necessary to add to this figure 
rent on the house. With these additions, it is shown that the owner 
receives a house to live in and $481 in actual value, while the part 
owner receives a house to live in and $628 in actual value, and the 
tenant a house and $645. 

There is another factor which may be obtained from this calcula- 
tion that is of as much or even more importance than labor income. 
This factor is obtained by deducting the cost of family living from 
the gross labor income mentioned above, which gives the actual number 
of dollars, in addition to interest on investment, which the operator 
has left at the end of the year for improvements of any kind, for 
investment, for giving his children a better education. According to 
Table X, the farm owner would have $696 for this purpose, the part 
owner $592, and the tenant $368, provided no mortgage interest had 
to be met. The average owner's mortgage is $880 and the average 
part owner's mortgage $920. Allowing 5 per cent interest on these 
mortgages, the owner would still have left $652 and the part owner 
$546. This gives a more accurate basis for judging^ the efficiency of 



LAND TENURE AND LAND POLICY 65 1 

the different classes of farmers from the standpoint of citizenship, 
while labor income judges them from the standpoint of economic 
efficiency. A man who has $700 to spend in making his home modern 
or sending his children to college or in helping in rural betterment, 
must necessarily be a better and more desirable citizen than one who 
has half that amount. 

206. A NATIONAL WASTE 1 
By W. D. BOYCE 

During the next week the great national hegira, the flight of the 
unsatisfied renter for fields new and untried, begins and ends. This 
flight of the dissatisfied renter is one of the most costly follies of our 
great American unrest. The cost to the farming business of the 
country each year for this annual farm moving week mounts into the 
millions of dollars. v And the pity of it all is that practically no one is 
the winner thereby; all parties to the transaction lose more than 
they win. The renter loses, the landlord loses, the general community 
and the nation at large lose. 

Farming is a permanent business; it is no "fly by night" occupa- 
tion. No man can start business on a farm without more expense and 
labor the first year than will be required to continue it on the same 
scale the second and each succeeding year. No man can pull up 
stakes and leave a farm at the close of the year without sacrificing the 
results of labor which he has done the past or preceding year and 
which he could not realize upon before the coming year — results 
which his successor will not be able to realize upon to anywhere near 
the extent which he himself could had he remained there. He loses 
without his successor gaining what he loses. 

The renter who ends harvest knowing that he will move in the 
spring, will not do as good a job of hauling out manure and fall plow- 
ing as he would were he going to stay; nor does he take as good care 
of the buildings and other improvements. You cannot blame him; it 
is inherent human nature not to labor for another man's harvest; 
you would do the same thing if you were in his shoes. But the 
farm itself suffers through his lack of care for it. The landlord, the 
coming tenant, the community, and the nation at large suffer because 
of the depreciated productiveness of that farm; and no one gains 
thereby. 

1 An editorial in The Farming Business, February 26, 1916. 



652 AGRICULTURAL ECONOMICS 

Our laws and customs of tenantry which even permit, let alone 
causing, such an extensive fluctuation in farm occupation each year 
are a serious national economic weakness. They are a brake on the 
wheels of farm progress, they are a dead load which the nation as a 
whole must bear without any rhyme or reason. It is mighty poor 
business, to say the least. 

207. RESULTS UNDER DIFFERENT TYPES OF LEASE 1 
By O. G. LLOYD 

Cash rented farms have the largest acreage, the highest value of 
work horses and tools per acre, and an amount of man labor per acre 
equal to that used on stock-share and share-cash rented farms. This 
combination is more profitable than that used on any other type of 
rented farms. It is probable that all leased farms, especially those 
rented for share-cash and by the bushel, would be more profitable if 
the business were larger, and if the size of the farm and the horse, 
tools, and man labor per acre were increased. 

There is a conflict of interest between the share landlord and the 
share tenant with respect to the amount of horse, tools, and man 
labor that should be applied to each acre. The rent received by the 
share landlord varies with the amount of labor used on each acre. 
Double the labor per acre at the expense of the share tenant and the 
landlord's rent is increased while the tenant's expense may exceed 
the value of his share of the product. The cash tenant on the other 
hand applies labor liberally to each acre, since he gets the entire 
product before paying the rent, while the share tenant will stop before 
the cost of labor equals the value of his share instead of the total 
value of the product. 

The most livestock is kept and the highest yields of corn are 
obtained on stock-share rented farms. 

Better use is made of manure if handled by a manure spreader, 
and eight out of every ten stock- share rented farms have tliem while 
none is owne 1 on the tushel-rented farms. When only about 16 per 
cent of the receipts come from the sale of crops, most of what is 
raised on the place is fed. This is what is done on stock-share farms, 
while on bushel-rented farms there were less than 7 animal units to 
every 100 acres, the yield of corn was 41 bushels per acre, and more 
than 92 per cent of the receipts were derived from the sale of grain. 

1 Adapted from Bulletin 159, Iowa Experiment Station, pp. 165, 179-84. 



LAND TENURE AND LAND POLICY 



653 



The group of tenants with five times the capital of the smallest 
capital group remained on the same farm nearly three times as long 
and made more than eight times the labor income. While " money 
makes money," one reason for its doing so is long tenure on the same 
farm. Ben Franklin's saying, "Two moves are as bad as a fire," is 
as true now as it was in his day. 

The roaming farmer regards a large amount of capital as a positive 
hindrance to him, for at moving time he must either sell at a sacrifice 
or move at heavy expense. 

Such a wanderer cannot hope to make a large labor income, for he 
lacks the work animals, tools, and productive livestock for successful 
farming. He cannot afford to seed clover or alfalfa or follow a crop- 
ping system which will maintain high yields, for he does not intend 
to stay long enough to reap the benefit of such work. He is a grain 
farmer who works hard during the summer but sells all his grain at 
harvest time and does very little until the following spring, except 
trade horses and do a few chores about the barn. 

One reason for the shifting of tenants who have small capital is 
the fact that the majority of them are young men who wish larger 
farms as they accumulate sufficient capital and experience to operate 
a larger business. The stock-share method of renting enables the 
young tenant without adequate capital and mature experience to 
operate a large business from the beginning. 

TABLE X 

The Use of the Stock-Share Method of Renting Should Be Encouraged 



Method of Renting 



Age of Tenant 



Age of Land 
lord 



Per Cent of 
L. L.'s Who 
Live on Farm 
or in Adjoin- 
ing Towns 



Per Cent of 
L.L.'s Capital 
in Buildings 



Farm Capital 
Except Land 
and Buildings 



Stock-share 

Cash 

Share-cash . 

Bushel 

Average. . . 



37 
42 

41 
36 
39 



55 
60 

52 
65 
56 



$6,433 
5,240 
2,726 
1,843 
5,133 



Generally, landlords are middle aged men who live on the farm 
or in an adjoining town. If they take an active part in the supervision 
of the farm, they provide better farm buildings and more adequate 
capital for operating the farm. 



654 AGRICULTURAL ECONOMICS 

While most tenants are young men, the average age of the tenants 
is raised by some aged men, who, through misfortune, are still renting 
land. At the average age of fifty-six years, the landlords are at the 
most productive period of their lives. As about three-fourths of them 
live on their rented farms or in an adjoining town, their capital and 
experience should be used. This can best be done under a system of 
renting which enables them to retain part of the supervision of the 
farm and share directly in the net profits. The stock-share method 
of renting is practical. 

Farmers in some of the dairy counties in the northeastern part of 
the state estimate that from one-third to one-half of the rented farms 
in their counties are leased on the stock-share plan. 

As the landlord takes an active part in the buying and selling, he 
should live near Ihe farm. From a recent survey of 525 tenant farms, 
more than 17 out of every 20 landlords live within 12 miles of their 
farms, while 2 out of every 3 live on the rented farms or in adjoining 
towns. Between the ages of fifty and sixty the landlord is capable 
of managing the farm business as well or better than at any time in 
life. Having obtained his rich fund of experience and having lived 
so many years on the farm, he naturally wishes to keep in touch with 
the farm work, if someone will assume the responsibility of the manual 
labor. 

Present economic conditions make the use of the stock-share 
method of renting a necessity. The advance in the price of land, the 
increase in the size of the farm, and the necessary equipment and 
labor properly to manage it require about $6,000, or more capital from 
the tenant than he unaided can furnish. The landlords are generally 
prepared to advance some credit to the tenant, but as they have little 
supervision of the farm business under the cash and share-cash plans, 
they do not wish to assume the risk of poor management, and the 
farm business is not so profitable. The stock-share landlord has an 
interest in the productive livestock, obtains one-half of the net receipts, 
and often advances all the money to buy the stock. Sometimes he 
takes the promissory note of the tenant for much of the working 
capital necessary properly to equip and operate the farm. 

The average tenant between the ages of twenty-five and thirty-five 
years lacks the experience to manage such a large and intricate busi- 
ness. Yet, under the cash and share-cash methods he assumes most 
if not all the buying and selling, as well as the management of field 
work. The stock-share method enables the tenant to give most of 



LAND TENURE AND LAND POLICY 655 

his time to production such as field work and feeding, etc., while the 
landlord can use his time in buying and selling, etc. Data taken from 
Iowa farms indicate that farm buildings on stock-share rented farms 
are the most used and are the most adequate for keeping livestock. 
Landlords generally are very slow in making permanent improvements 
if they have no assurance that the buildings will be used and proper 
care taken of them. 

Besides encouraging the most profitable types of farming and 
maintaining the fertility of the soil, stock-share renting brings co- 
operative effort between landlord and tenant instead of working 
against each other. Every dollar made for the farm business is shared 
equally, and the advance of the interests of the one means prosperity 
for the other also. The "old people" are freed from the heavy labor 
of the farm and given liberty to come and go, yet by retaining some 
supervision of the farm its interests can be best conserved. The land- 
lord associates freely with other men and has a greater opportunity 
to learn when, where, and what to buy and sell, is interested in the 
improvement of the farm, and is a booster and co-operator jn the 
interest of the farm. 

Two principal reasons for the success of stock-share renting are 
adequate capital and capable supervision furnished by the landlord. 
When the stock-share tenant accumulates adequate capital and 
experience so that the assistance of the landlord is no longer needed, 
it is to the interest of the tenant to rent for cash. In assuming more 
risk and supervision he acquires more liberty in equipping and man- 
aging the farm and obtains a large labor ^ncome. 

B. Division of Income between Landlord and Tenant 

208. LANDLORD'S RETURN IN RELATION TO TENANT'S 
LABOR INCOME 1 

By E. A. BOEGER 2 

A study of 878 records relating to the business of tenants on plan- 
tations in the Yazoo-Mississippi Delta, indicated that the landlord 
is assured of a return of between 6 and 7 per cent on his invest mod where 
the land is operated by cash renters, no matter what the yield or the 
tenant's labor income may be. 

1 Adapted from Bulletin 337, United States Department of Agriculture, pp. 12-13. 
a E. A. Goldenweiser, joint author. 



/ 



656 



AGRICULTURAL ECONOMICS 



Where the land is worked by share croppers or share renters the land- 
lord's rate of interest often falls below 6 per cent, but when the yield is 
good and the tenant makes a good return, the rate of interest sometimes 
rises to more than three times that amount. 

It appears that the landlord can make better money, on the aver- 
age, when he rents his land on some system of shares. The average 
rate of interest received by the landlord from share croppers was 
13.6 per cent; from share renters, n. 8 per cent; and from cash 
renters, 6 . 6 per cent. 

Table VIII shows the rate of interest received by landlords on 
their investment in farms whose tenants made each specified labor 
income. The chart shown on p. 657 (Fig. 3) shows the relationship 
graphically. 

TABLE VIII 



Class of Tenants 



Labor Income 



All 
Tenants 



Deficit 



Under 
$100 



$100 to 
$299 



$300 to 
$499 



$500 to 
$699 



$700 to 
$999 



$1,000 
and 
Over 



Number of Tenants in Each Labor Income Group 



All tenants . . . 
Share croppers 
Share renters . 
Cash renters. . 

All tenants . . . 
Share croppers 
Share renters . . 
Cash renters. . 



878 


18 


35 


299 


332 


101 


62 


31 


445 


1 


12 


180 


204 


38 


8 


2 


136 


4 


7 


41 


48 


18 


14 


4 


297 


13 


16 


78 


80 


45 


40 


25 


Average Rate of Interest on Landlord's Investment on Holdings 


of Tenants in Each Labor Income Group 



10.6 
13-6 
11. 8 
6.6 



7.0 


5.5 


8.2 


12.7 


13 -2 


9.6 


I.I 


3-1 


8.7 


15-5 


19.8 


18.2 


7.1 


8.0 


9.2 


12.4 


13-3 


I4.8 


8.0 


5-7 


6.8 


6.7 


6.4 


6.0 



10.2 

25-7 

16.6 

71 



The landlord made only 1 . 1 per cent on his investment in the case 
of the share cropper who lost money and only 3 . 1 per cent where the 
tenant made under $100, but the rate increased rapidly with the 
tenant's labor income, and in the cases where the tenant made as 
much as $1,000, he gave the landlord a return of over 25 per cent on 
his investment. In case of the share renters the landlord in no group 
averaged less than 7 . 1 per cent and his rate of interest rose as high 
as 16.6 per cent where the tenant had a labor income as high as 
$1,000. In the case of cash renters the landlord's rate of interest 
varied within much narrower limits, the lowest being 5.7 per cent, 



LAND TENURE AND LAND POLICY 



657 



where the tenants made less than $100, and the highest, 8 per cent, 
where the tenants reported a deficit. 

The variations in the rates of the landlords' interest are somewhat 
irregular owing to the small numbers involved, but in general it is 
clear that the landlord takes the greatest chances and, when successful, 
reaps the highest rewards from share croppers; with share renters the 
risks are less, and so are the possible rewards; while with cash renters 
the landlord takes a minimum risk and is assured of a return of 6 or 7 
per cent on his investment, which is less than he would ordinarily 
receive for money loaned in this locality with land as security. 



AVERAGE 

ROTTOF 


SHARE CROPPERS. 


SHARE RENTERS 


CASH RENTERS 


AVEKAtt 
HATtO* 
IHTERCSr 


25!* 
20 Z 
15% 

ior. 

57. 








25% 

20% 

15% 

ior. 
5T. 










1 


■ 




M/ERA3C 


J 


averse ■ H H I 




I 


l ■ ■ l 


|| 


I 


illilll 


B _ /ffiMM£**a.f._ 


.1 




DEFICIT 
0-99 
100-299 
300%99 
500 ? 699 
700-999 
'lOOO ♦ 


5 .8 J J J J g 

1 » i i t 1 J 


t » § S 2 S ♦ TENAMT5 

2 ° 2 8 § 2 J2 '«ome 



Fig. 3. — Rate of interest on landlords' investments in relation to tenants' 
labor income. 



Where the yield of cotton was as much as a bale per acre the 
tenant made $624 for his labor and the landlord received 16.4 per 
cent on his investment, while where the yield was less than o . 6 of a 
bale the tenant had a labor income of $246 and the landlord made 
only 7 per cent on his money. 

The labor income goes up with the yield of cotton for all classes of 
tenants, but the rise is least pronounced for share croppers and most 
pronounced for cash renters. Thus the labor income of a share 
cropper was not quite twice as great where the yield was a bale or 
more as where it was under o . 6 of a bale, while the labor income of 
a share renter was nearly four times as great, and that of a cash 
renter more than four and one-half times as great where the yield was 
high as where it was low. 



658 



AGRICULTURAL ECONOMICS 



The situation is reversed as regards the interest on the landlord's 
investment. The rate on share croppers' holdings was nearly three 
times as great where the yield was a bale or more as where it was 



TENANTS 
LABOR 
INCOME 


SHARE CROPPERS 


SHARE RENTERS 


CASH RENTERS 


TENANTS 
LABOR 
INCOME 


$1200 
MOO 
1000 
900 










S I200 
1100 
100 
900 
800 
700 
600 
600 

*oo 

300 

200 

|Q0 


























700 
600 
500 


























































200 
100 
















YIELD OF 
COTTON 
PER ACRE 


UNDER .6 TO .B TO 1 BALE 
6 BALE .8 BALE 1 BALE & OVER 


UNDER .6 TO .8 TO ) BALE 
6 BALE .5 BALE I BALE & OVER 


UNDER .6 TO .8 TO 1 BALE 
.6 BALE .8 BALE (BALE 8. OVER 


YIELD OF 
COTTON 
PER ACRE 



Fig. 4. — Tenants' labor income in relation to yield of cotton per acre 



AVERAGE 
RATE OF 
INTEREST 


SHARE CROPPERS 


SHARE RENTERS 


CASH RENTERS 


AVERAGE 
RATE OF 
INTEREST 


18% 
16% 
14-% 
12% 
10% 
8% 
6% 
4% 












18% 
16% 
14% 
12% 
10% 
8% 
6% 
4% 
2% 














_ 








■ I 1 




I 




III' 




1 


_ 


M 






■ I 


1 


m 


■ III 
1 1 

nil 








III 






_■ 


L 

R 


YIELD OF 

COTTON 

PER ACRE 


UNDER .6 TO 4 TO IBAL 
.6BALE .8 BALE 1 BALE &0VE 


E 

R 


u 
e 


NDER .6 TO .8 TO IBAL 
BALE A BALE 1 BALE BOVE 


UNDER .6 TO .8 TO IBALE 
6BALE .8BALE IBALE BOYER 


YIELD OF 

COTTON 

PER ACRE 1 



Fig. 5. — Rate of interest on landlords' investment in relation to yield of 
cotton per acre. 

under 0.6 of a bale, on share renters' holdings it was one and three- 
fourths times as great and on cash renters' it was about one and one- 
fifth times as great. Thus the landlord gains a great deal more by 



LAND TENURE AND LAND POLICY 659 

high yields in the case of share croppers than in the case of share or 
cash renters, and has a greater object in keeping close supervision 
over his share croppers. 

209. COMPARATIVE INCOMES IN THE CORN BELT 1 
By E. H. THOMPSON 2 

A survey of 247 tenant farms in the corn belt indicated labor 
incomes of $870 for the farm operators, on the average of three dis- 
tricts. It rose as high as $1,139 m Illinois and fell as low as $716 in 
Iowa. The average labor income of 273 owners who worked their 
farms was $310 in Indiana, $622 in Illinois, and $291 in Iowa. 

The 247 tenant farmers made an average labor income of $870 
from an investment of less than $2,500. When it is remembered that 
the farm owners with over 12 times this investment made less than 
half the labor income of the tenants, the evidence is unmistakable 
that the man with small capital should rent rather than buy a farm. 
Of course the farm owner has a larger sum available for the family 
living, since, with an average capital of $30,606, he has $1,530 as well 
as his labor income of $408. If the farm owner is free of debt, as 
one-half of them are, he has $1,938 available for a living, as compared 
with the tenant's $992. 

In addition to this sum available for a living, each has what the 
farm furnishes in the shape of produce. After the tenant pays his 
living and personal expenses out of this amount his savings cannot 
be large. If we allow the owners 3 . 5 per cent on their investment 
instead of 5 per cent they would then receive approximately the same 
labor income as the tenants ($870). This percentage is the same as 
that received by the landlords from the rented farms. Taking into 
consideration the results from all the farms managed by owners and 
by tenants, they show that a return can be expected of 3 . 5 per cent 
on the investment and a labor income of $870. 

Seasonal variation and fluctuating prices have a marked influence 
on the profits from farming in the districts studied. The average 
price received for corn sold by the landlords of the 247 tenant farms 
was 41 cents, and a drop of 5 cents alone would have reduced the 
income 6 per cent. 

Incomes received by landlords. — The farm, in the case of the land- 
lord, is a business investment. He furnishes the capital, largely in 

1 Adapted from Bulletin 41, United States Department of Agriculture, pp. 9-13. 

2 H. M. Dixon, joint author. 



66o 



AGRICULTURAL ECONOMICS 



the form of land, and the tenant furnishes the necessary labor and 
other means for its operation. The average investment of the 247 
landlords for the three states studied was $25,210. The average net 
income on the capital invested was 3 . 5 per cent. All items of expense, 
including repairs, seeds, taxes, and insurance, were deducted before 
figuring the net returns. Table V gives the average capital, receipts, 
expenses, and returns for the landlords in each state. 

TABLE V 

Average Capital, Receipts, Expenses, and Profits of Landlords for 247 
Farms Operated by Tenants 



Item 


Indiana 
(83 Farms) 


Illinois 

(71 Farms) 


Iowa 
(93 Farms) 


Average 
(247 Farms) 


Average area, acres 


128 


202 


187 


172 


Average capital 

Average receipts 

Average expenses 

Average farm income . . . 


$18,423 

1,002 

351 

651 


$36,479 

1,538 

213 

1,325 


$20,728 
1,014 

354 
660 


$25,210 

1,185 

306 

879 


Average profit on in- 
vestment, per cent* 


3-53 


3 64 


3 19 


3-5 



.* Obtained by dividing the farm income by the average capital. 



The average return on investment from the farms in Illinois was 
3 . 6 per cent, in Iowa 3 . 2 per cent, and in Indiana 3 . 5 per cent. The 
income is a moderate return on the large capital, considering the 
enormous rise in land values during the past ten years. In computing 
this income no credit has been allowed for the rise in value of real 
estate, except in case of actual improvements. 

There has been a marked tendency throughout the entire country 
to consider the farm more and more as a business proposition. The 
landlord who is receiving 3 . 5 per cent net from his farm, with the 
bare land figured at $150 or more an acre, has a good, safe investment. 
It would seem from the results that if the year studied was a normal 
one, land in the corn belt is not overvalued. Changes in the price of 
the staple products, such as corn or oats, or material changes in the 
cost of production of these crops would be reflected in the price of 
farm land. Unless the price of corn becomes much higher for the 
next period of years, a pronounced increase in the value of land in 
this region cannot be expected. 



LAND TENURE AND LAND POLICY 



66 1 



The advisability of buying a farm as an investment with the 
intention of not living on it is often a perplexing question. 

Variation in the profits of landlords. — Table VI gives the variation 
in the landlord's returns in the three states studied. 



TABLE VI 

Variation in Profits or Landlords on 247 Tenant Farms in Indiana, 
Illinois, and Iowa 



Landlord's Profit 

on Investment 

(Per Cent) 


Number of 
Landlords 


Percentage of 
Total Number 


Landlord's Profit 

on Investment 

(Per Cent) 


Number of 
Landlords 


Percentage of 
Total Number 


Less tjian 1 . . . . 

1 . 1 to 2 

2 . 1 to 3 

3.1 to 4....... 


6 
20 

75 
78 


2.4 

8.1 

30-4 

31.6 


4-i to 5 

5 • 1 to 6 

6 . i to 7 

7.1 to 8 


42 

13 

7 

6 


17.O 

5-3 
2.8 
2.4 



Out of 247 men 6 received less than 1 per cent on their invest- 
ments. The same number received between 7 and 8 per cent; none 
received over 8 per cent. It is clear that no phenomenal returns can 
be expected from capital put in farm land in those states at the present 
time. It is believed that the data in Table VI are a very good indi- 
cation of the returns one may expect from a farm investment in those 
districts. The chances of making more than 5 per cent are about 
1 in 10. 



210. A LIBERAL STOCK-SHARE LEASE 1 
Date 

Made this th day of February, a.d. 19. . . ., by and between 

of 

County, Iowa, lessor, and of 

County, Iowa, lessee. 

Description of Land. 

Witnesseth: That the said lessor has this day leased to said lessee, 

his heirs and assigns, the following land, to-wit: 

Acres. 

Type of Farming. 

This leasing arrangement is known as "Share Plan," and the premises 
to be used as grain, stock and dairy farm principally. 

1 From Bulletin ifg, Iowa Experiment Station. 



662 AGRICULTURAL ECONOMICS 

Length of Lease. 

For the term of years, term commencing March ist, 19 . 

and ending March ist, 19...., on the following terms and con- 
ditions: 

The Following Will Be Furnished and Shared by: 

Both lessor and lessee taken together will be known by the firm name 
of 

Lessor. 

Will furnish above described farm, including the improvements thereon, 
and material for needed repairs and improvements. 

Lessee. 

Will furnish all the machinery, tools, harness, and do all work and hire 
and pay all help necessary to properly care for the crops and stock on 
premises above described. Will also furnish coal for threshing, make 
all repairs and improvements where skilled labor is not required, and 
will haul all material to the farm and will board extra help. Lessee 
is to deliver to market all produce. All free of cost to lessor. Lessee 
also agrees to plant and care for one acre, or more, of potatoes. Can 
have reasonable amount of land for garden and potatoes, milk, poultry, 
and eggs for family use only. 

Company. 

& Co. will furnish all the livestock, 

consisting of horses, cattle, hogs and sheep. There shall be 20 cows or 
more kept on the farm. Will furnish poultry, seed grain, seed corn, 
grass seed, feed, salt, one separator and one manure spreader. Will 
pay service fees, taxes, insurance, expense of repairs to windmill and 
waterworks, also all expense of twine and threshing bill. For hauling 
milk and cream when not hauled by lessee. Milk and cream checks 
to be divided by purchaser. Each shall share equally in all the pro- 
ceeds from the sale of stock, grain produce, etc., from the farm. The 
butter used by each to be taken out of their one-half. Proceeds from 
the sale of potatoes, poultry, eggs, all fruit on the farm to be half and 

half, each to gather their own share. All business of 

& Co. in the way of payments and receipt shall be through the 

Bank of 

Noxious Weeds to Be Destroyed. 

Lessee further covenants and agrees that he will farm said land in a 
good, farmlike and workmanlike manner; that he will commit no 
waste nor suffer injury to be done to the premises; that he will allow 



LAND TENURE AND LAND POLICY 663 

no noxious weeds to go to seed on said premises, but will destroy the 
same, and will keep the weeds and grass cut in the roads adjoining the 
land. 

Manure to Be Scattered Where Most Needed. 

That he will draw out and scatter on said premises on or before Decem- 
ber 1 st of each year, where most needed, all manure being and made 
on said premises up to December 1st next preceding the end of the 
term, and that in default of so drawing out and scattering manure he 
will allow and pay to lessor as further rent the sum of $50.00 for each 
year that such default shall occur. 

Acres to Be Left Plowed. 

That he will leave as many acres plowed on said premises at. the 
end of his term as he finds plowed when he takes possession, and in 

default of so doing he will pay to lessor $ an acre for each 

acre short of such number. 

Care of Premises. 

That he will keep the buildings, fences and other improvements on 
said premises in as good repair and condition as the same are when 
he goes into possession, or as good as they may be put in during said 
term; that he will not assign his lease or sub-let any part of said 
premises without the written consent of lessor first had; that he will 
not bring mortgaged property on said premises without the consent of 
said lessor; that he will not sell or remove any of the crop from said 
premises without the consent of lessor. 

Surrender Possession in Case of Default or at End of Lease. 

That in case he shall, from any cause, neglect, refuse or be unable to 
properly prepare said land, sow, plant, cultivate, harvest or care for 
any and all crops to be raised on said land, said lessor, his agents, heirs 
or assigns, may at their option, upon twenty- four hours' notice to 
lessee, enter upon said premises and take possession thereof and of the 
crops growing or being thereon, and properly care for the same and 
sell the same, and the proceeds remaining after payment of the rents, 
cost and expense and damages shall go to lessee ; that he will surrender 
possession of the stubble land, for the purpose of plowing, in the fall 
preceding the termination of this lease, as soon as the crop has been 
removed from the same; that he will surrender possession of said 
premises at the end of the term, or sooner termination thereof, and if 
immediate possession be not given, that he will pay lessor, or assigns, 
the sum of $10.00 for each and every day possession is thus withheld 
as liquidated damages for non-surrender. 






664 



AGRICULTURAL ECONOMICS 



Lien on Property of Lessee for Amount Due Lessor. 

That a failure to keep and perform any of the agreements hereinbefore 
mentioned shall, at the option of said lessor, or assigns, operate as a 
forfeiture of this lease and terminate the term, and lessor may take 
possession of the premises at once without process of law, or he may 
bring an action at law for possession, said lessee being, from the date 
of such failure, a tenant holding over after the expiration of his term; 
that in consideration of this lease, and the agreements herein contained 
on the part of the lessor, said lessee covenants and agrees to pay said 
rent and keep and perform the agreements hereinbefore set forth, 
hereby covenanting that said rents as well as other moneys due from 
him to said lessor for plowing, or damages, or otherwise, shall be and 
hereby is declared and made a perpetual lien on any and all crops, 
stock and other personal property of lessee at any time kept, had or 
used on said premises, whether the same are exempt from execu- 
tion or not, such lien to attach from the commencement of the 
term. 

Lessor's Right of Entry at Any Time. 

Said lessor reserves the right of himself, his employes or assigns to 
enter upon said premises at any time for the purpose of viewing the 
same or making repairs or improvements thereon, the same not to 
interfere with the occupancy of the lessee; and reserves the right to 
himself or agent to enter upon said premises for the purpose of plowing 
the stubble land, from which the crops shall have been removed in the 
fall preceding the termination of this lease. 

How Division Shall Be Made at End of Lease. 

At the end of the term of this lease an accounting shall be had between 
the respective parties hereto, and the produce, stock, etc., upon said 

farm belonging to & Co. shall be 

equally divided and if a proper settlement cannot be made in this way, 
all parties hereto agree to having a public sale on the premises for the 

purpose of dissolution. After all debts of 

& Co. and the expenses of having the sale are paid, the proceeds to be 
equally divided. 



Liability of Each Party. 

Neither party shall have the right to bind the other by any contract 
outside the scope of this agreement, or by any purchases made 
within the scope of this agreement except with the consent of the 
other. 

Signed 



LAND TENURE AND LAND POLICY 



665 



C. The Problem of Farm Tenancy in the United States 

211. THE TREND OF LAND TENURE IN THE UNITED STATES 

SINCE 1880 1 

By CHARLES L. STEWART 

When the results of the tenth census were published, considerable 
surprise was evinced at the extent to which the farms of the nation 
were operated by tenants. Since that time, however, tenancy has 
become more and more prevalent in the country. The accompanying 
table summarizes the census data on the tenure of farms for the main 
geographic divisions. 

table 1 

Percentage of Farms Operated under Various Forms of Tenure, United States, 1880-1910* 



Tenants 

1910 

1900 

1890 

1880 

Part owners f 

1910... 

1900 

Managers 

1910 

1900 

Owners proper 

1910 

1900 



United 
States 



35 
28 
25 

9 
7 

o 
1 

S2.7 
55-8 



New 
Eng- 
land 



8.0 
9-4 
9-3 

8.5 

3-1 

2.9 

2.8 
2-5 

86.1 
85.2 



Middle 
Atlantic 



70.3 
68.5 



East 

North 
Cen- 
tral 



27.0 
26.3 
22.8 
20.5 

11. 7 
10. o 

1.0 
1.0 

60.3 

62.8 



West 
North 
Cen- 
tral 



30.9 
29.6 
24.0 
20.5 

16. 1 
14-5 

0.8 
0.8 

52.3 
55-1 



South 
Atlan- 
tic 



45-9 
44-2 
38.5 
36.1 

6.4 
4-9 

0.7 
0.9 

46.9 
49-9 



East 
South 
Cen- 
tral 



50.7 
48.1 
38.3 
36.8 

6.9 
5-o 

0.3 
0.5 

42.1 
46.3 



West 
South 
Cen- 
tral 



52.8 
49- 1 
38.6 
35-2 

7.6 
5-5 

0.5 
0.7 

39- 1 

44-8 



Moun- 
tain 



10.7 

12.2 

7.1 

7-4 

8.6 
8.3 

1.6 
3-4 

79- 1 
76.1 



Pacific 



17.2 
19-7 
14-7 
16.8 

10.9 
11. 3 

2.8 
2-9 

69.1 
66.1 



* Census, 1910, V, 122, 123. 

t A "part owner" owns some of the land he operates, and rents additional land. 



A comparison of the percentages of the various geographic divi- 
sions reveals a wider spread or range each successive decade. The 
percentage of tenant farms has moved higher most markedly where 
it was highest previously, and has shown least positiveness in increas- 
ing where it was already low. Taken as a whole, the increase in 
prevalence of tenant farming has been persistent, although not very 
rapid. 

The farms operated by part owners and managers were doubtless 
classified with those of owners proper in 1880 and 1890. So far as 
the managed farms are concerned, the error involved in counting 

1 Adapted from "Tenant Farming in the United States, with Special Reference 
to Illinois," University of Illinois Studies in the Social Sciences, Vol. V, No. 3, 
pp. 12-18. (Copyright by the University of Illinois.) 



666 AGRICULTURAL ECONOMICS 

them in with the farms operated by owners is not great. There was 
no section in which managed farms constituted more than 3 per cent 
of all farms in 19 10. For some purposes it is desirable to regard the 
farms of part owners as not essentially different from the farms of 
owners proper. In 1900 the farms of part owners contained, on the 
average, nearly 5 acres more of owned land than the average farm 
entirely owned by the operator. The part owners constituted 9 . 3 
per cent of all farm operators in 19 10. 

The tenure statistics based on farms afford a good idea of the 
numbers of the various kinds of operators. Tenure data based on 
acreage, however, give some slightly different impressions. The 
cause of the variations is the fact that farms differ in size between 
various tenures and sections. 

The average acreage of all farms declined from 146 . 2 in 1900 to 
138. 1 in 1910. Only the farms of the North Central states showed 
a tendency to increase in size. The divisions where small farms pre- 
vailed in 1900 underwent a still further reduction in the size of operat- 
ing units by 19 10. 

In the northeast quarter of the country and in the Mountain and 
Pacific divisions, on the other hand, the size of tenant farms was 
greater than that of the farms operated by the owners. As a rule, 
however, the tenants operated farms less than two-thirds as large as 
those operated by the owners. In the South Central states the tenant 
farms were between a third and a half as large, on the average, as the 
farms of owners. 

The farms of part owners were approximately twice as large as 
those of owners proper in 1900, but fell off nearly 20 per cent by 1910, 
while the farms of owners proper underwent a slight increase during 
that period. The enormous farms of managers were in the territory 
west of the Mississippi River, where the farms of all tenures, except 
tenants in the West South Central states, were much above the 
general average in size. 

On the basis of farms, tenancy was most marked in the Southern 
states. The number of tenant farms and the percentage of farms 
operated by tenants in the states of those divisions has been so great 
and increasing so rapidly as to give more or less alarm to some students 
of the situation. When, however, the statistics of tenure are placed 
on the basis of acreage, as in the second table, the percentage of 
tenancy in the South loses much of its alarming magnitude. This is 
due to the small size of the tenant farms in that region. The social 



LAND TENURE AND LAND POLICY 



667 



significance of tenancy in the South is not minimized, however, but 
rather augmented by the fact that great numbers of tenants operate 
small farms. On the basis of acreage the East North Central division 
is nearly abreast with the South Atlantic division in the percentage 
of tenancy, while the West North Central states stand between the 
East and West South Central groups. On the whole, the percentages 
of tenancy are much more nearly uniform in the various divisions 
when the statistics are based upon acreage than when based upon 
farms. 

TABLE 11 

Percentage of Farm Acreage Operated under Various Forms of Tenure, United States, 



Pacific 



Tenants 

1910 — , 

1900 

Part owners 

1910 

1900 

Rented by part owners 

1910 

1900 

Owned by part owners 

1910 

1900 

Owners proper 

1910 

1900 

Managers 

1910 

1900 

All lessees 

1910 



1900 

All deed-holders 



1910. 
1900. 



United 
States 


New 
Eng- 
land 


Middle 
Atlantic 


East 
North 
Cen- 
tral 


West 
North 
Cen- 
tral 


South 
Atlan- 
tic 


East 
South 
Cen- 
tral 


West 
South 
Cen- 
tral 


Moun- 
tain 


25.8 
23-3 


7-8 
9-4 


25-9 

28.6 


30.0 
27-3 


27.0 
23.6 


30.1 
30.6 


27.9 
27.4 


26.7 
19.0 


10.6 
9-4 


15-2 

14.9 


4.2 
4.2 


7-4 
5-9 


13-9 
11. 7 


23-9 
23-7 


6.3 
4-7 


8.0 
5-8 


13.8 
17.7 


16.7 
22.0 


7-4 
7-1 


1.6 
1.6 


2.1 

1.6 


6.2 

5-2 


11. 5 
11. 4 


2.4 
1.8 


2.7 
2.0 


6.4 
8.2 


8.9 
12.5 


7-8 
7-8 


2.6 
2.6 


5-3 
4-3 


7-7 
6.5 


12.4 
12.3 


3-9 
2.9 


5-3 
3-8 


7.4 
95 


7-8 
9-5 


52.9 
51-4 


82. s 
82. s 


62.7 
62.2 


41 
59-0 
5 

2.0 


47-0 
49.4 


60.4 
61.4 


52. 1 
64.8 


47-9 
37-1 


53-2 
33-0 


6.1 


5-5 


4.0 


• 2.1 


3-2 


2.0 


11. 6 


18.5 


10.4 


3-9 


3-3 


2.0 


3-3 


3-3 


2.0 


26.2 


35-6 


33-2 
30.4 


9-4 
n. 


28.0 
302 


6.2 

32. s 

3 i.8 
65. 5 
6 


38.5 
35-0 


32.5 
32.4 


30.6 
29.4 


33- 1 
27.2 


195 
21.9 


60.7 
59-2 


8 S .i 
8S.1 


68.0 

66.5 


59-4 
61.7 


643 
643 


67-4 
68.6 


55-3 
46.0, 


62.0 
42.5 



19.8 

19-5 

21.7 
19.6 



20.6 
18.6 

43-1 
42.9 

15-4 
18.0 

20.9 
20. S 

63.7 

61. s 



* Census, 1900, V, 308; 1910, V, 114. 



Because of the large size of their farms, the proportion of farm 
land operated by part owners and by managers is much larger than 
the number of such operators would indicate. In 1910 the part 
owners operated three-fifths as much farm land as the tenants. They 
hired nearly half of this land. Counting both the land hired by part 
owners and the land hired by tenants, the data indicate that in 19 10 
the leasing of farm land was most prevalent in the North Central 
states. 1 

1 The individual states in which the percentages of farm land operated under 
lease were highest are as follows: in 1900, Delaware, 59.5; Illinois, 4.5.2; and 
Maryland, 43.2; in 1910, Oklahoma, 63.1; Delaware, 52. S; and Illinois, 51.0. 



668 AGRICULTURAL ECONOMICS 

The percentage of farm land leased in the United States in both 
1900 and 1 9 10 was smaller than indicated by the data based on the 
number of tenant farms. On the other hand, while there was only 
a slight increase in the percentage of farms operated by tenants 
between 1900 and 19 10, the proportion of the farm area operated 
under lease was considerably greater in 19 10 than in 1900. 

Managers controlled 6 . 1 per cent of the farm land in the United 
States in 1910. In the West South Central and Mountain divisions 
they operated between 10 and 20 per cent of the land. 

In nearly all discussions of land tenure in the United States, only 
the statistics on farms operated by tenants have been employed, and 
the reader naturally supposes that the farms which are not operated 
by tenants are cultivated by their owners. The data on the per- 
centage of farms operated by tenants suggest that (1) owners operated 
a smaller part of the land in the Southern states than in any other 
division of the country; that (2) the farms of the Mountain and 
Pacific states were almost exclusively in the hands of owners; and 
that (3) operation of farms by owners was declining between 1900 and 
1 9 10. Each of these three contentions must be modified or rejected 
when the statistics of acreage are examined. Outside of the New 
England and Middle Atlantic states, operation of land by owners was 
most prevalent in the East South Central and South Atlantic states. 
Ownership was least common in the West South Central and West 
North Central groups. In the territory east of the Mississippi River, 
ownership was less prevalent in the (East) North Central states than 
in any other division. 

Operation by owners, while shown by the data based on acreage 
to be smaller than might be inferred from the more commonly quoted 
data based on farms, was more prevalent in the country as a whole 
in 1 9 10 than in 1900. It appears, therefore, that while the trend in 
the tenure of farms was somewhat toward tenancy, the trend in the 
tenure of farm land was toward a relative increase of both the lease 
and the owned acreage at the expense of the acreage controlled by 
managers. This was true especially in the West South Central, 
Mountain, and Pacific divisions. In the Middle Atlantic states the 
trend was toward ownership because of the decline in the percentage 
of farms run by tenants. In the North Central states, however, both 
east and west of the Mississippi River, and in the East South Central 
states, the trend was toward land leasing and away from operation 
by the owners. 



LAND TENURE AND LAND POLICY 669 

Mortgage encumbrance on owned land. — Although approximately 
6 out of 10 acres are operated by the owners in the United States, in 
many cases the nominal owners hold only an equity in the land. 
Statistics on farm mortgages were gathered in 1890, 1900, and 1910. 
They related only to farm land operated by the owners, the part 
owners in most cases having limited their reports to the land owned 
by them. 

The percentage free from mortgage in the United States declined 
from 71.8m 1890 to 66 . 4 in 1910. The percentage of farms operated 
by owners under mortgage in 19 10 was greater in the West North 
Central group of states than in any other division, although that 
division was the only one in which there was a decline from the per- 
centage prevailing in 1890. The district having the highest percen- 
tage of farms operated by owners encumbered east of the Mississippi 
was the East North Central division. Mortgaging of farms operated 
by owners appears to have been least common in the Southern states, 
although compared with the percentages prevailing in 1890 in those 
divisions the practice appears to have been growing with remarkable 
rapidity. 

Outside of the two North Central groups, there appears to be no 
correlation between the percentage of land leased and the extent to 
which the owned land is mortgaged. In those divisions, however, we 
find both the highest percentage of the farm land operated under 
lease and the highest percentage of the remainder of the farm land 
owned under mortgage. 

In all sections of the country there was a decline in the ratio of 
debt to value of farm property between 1890 and 1900. The equity 
increased from 64. 5 per cent in 1890 to 72.7 per cent in 19 10. This 
was in spite of the increase of 40 . 1 per cent in the amount of indebted- 
ness on the average American farm between the two dates. The 
amount of equity increased 106 . o per cent. It seems, therefore, that 
the rise in the value of mortgaged farms was so great that the 
increase in mortgage debt couL' not keep up with it. This was less 
true of New England and the Middle Atlantic states than of the 
remainder of the country. The proportion of the value of mort- 
gaged farms covered by mortgage was highest in those divisions 
in 1910. 

To summarize, in 1910 in the United States as a whole $$.2 per 
cent of the farm acreage was- operated under lease, 6.1 by salaried 
managers, about 20.4 by owners under mortgage — the mortgage 



670 



AGRICULTURAL ECONOMICS 



indebtedness representing 27.3 per cent of the value of the farms. 
Only about 40 per cent of the farm land was operated by owners clear 
of mortgage encumbrance. 



212. THE BRIGHT SIDE OF TENANCY STATISTICS 1 
By ERNEST LUDLOW BOGART 

The rise in the percentage of farm tenancy in the United States 
from 25.5 in 1880 to 28.4 in 1890 and 35.3 in 1900 has caused fear 
to be expressed on every hand, that our democratic conditions of land 
ownership are disappearing, and that methods of large-scale produc- 
tion in agriculture are crushing out the small independent farmer. 
It has been taken for granted generally that the increase of tenants 
was at the expense of owners and that such a tendency indicated 
movement toward Old World conditions of land tenure. Such alarm- 
ist statements rest upon a superficial analysis of the facts, and, 
properly interpreted, the statistics of farm tenure in the United States 
evidence a very healthy development and give bright promise for the 
future. 

Turning to the facts in the matter, we find that of every 1,000 
males engaged in agriculture the distribution was as follows: 



Year 


Owners 


Tenants 


Persons Not 

Owners or 

Tenants 


1880 

1890 

1900 


422 

420 
423 


145 
166 
231 


433 
414 

346 



This third group comprises the male members of the farmer's 
family and his hired laborers. The gain in the number of farm 
tenants has evidently been due to the large number of recruits from 
the class of farm laborers and farmers' sons, rather than to a decline 
in farm owners. Again, in each decade since 1870 the increase in the 
number of farms has been more rapid than that of the male population 
engaged in agriculture. Since the farms have increased faster than 
the rural population, the increased number of farm operators must 
have been drawn from the agricultural population itself and not from 
outside sources. Now the only class not already operating farms who 
could take up the new farms are the laborers or young men. So we 

1 Adapted from Journal of Political Economy, XVI (April, 1908), 201-3, 11. 



LAND TENURE AND LAND POLICY 671 

see that a constantly increasing proportion of those country boys who 
remain at home improve their condition by taking up farms. 

These facts are still more clearly brought out by considering the 
distribution of the three classes of the rural population in the different 
age groups. Thus in the age group ten to twenty-five, over 92 per 
cent of all were children or laborers (" others") ; and in the age group 
sixty-five and over, more than 80 per cent were owners. So far, 
therefore, from the conditions of farm tenure becoming less democratic 
in the last fifty years, they have steadily improved. There is today a 
healthy progress upward in the steady advancement of the wage labor- 
ers and children of farmers, first to tenancy and finally, with advancing 
age and ability and accumulated capital, to farm ownership. 

Another consideration also may be urged in substantiation of the 
belief that the real tendency of farm tenure is toward ultimate owner- 
ship rather than tenantry. As the country grows in population and 
develops, agriculture will necessarily become more intensive, as it is 
already in the East. Now it is precisely in those farms which are 
used for the most intensive cultivation, such as those for flowers and 
plants, for fruits, and for dairy products, that ownership is most 
prevalent — in each of these cases over three-fourths of the farms being 
owned — while in extensive culture, as hay and grain, the proportion 
of rented farms is greatest. 

Nor does the existence of mortgage indebtedness warrant any 
gloomy foreboding; taken in connection with the other facts it must 
be held to represent the struggle of the farmer tenant to purchase an 
equity in the farm he tills, or of the small owner to provide himself 
with the necessary capital for improvements. As a result of the 
prosperity of the last few years, the farmers have been paying off 
these debts, and are today probably in a stronger position than at any 
earlier time in our history. 

213. FOREBODINGS FOR THE FUTURE 1 
By PHILIP R. KELLAR 

It may seem to many to be a far cry from the farm tenure prob- 
lem of Great Britain to the farm tenure problem of the United States. 
Americans as a rule will look upon Chancellor David Lloyd-George's 
campaign " to free British land from landlordism and to get the people 

1 Adapted from the Forum, LII (July, 1914), 81-88. (Copyright by Mitchell 
Kennerley.) 



672 AGRICULTURAL ECONOMICS 

back on it," because the landholding system there is a "ghastly 
failure," as a campaign of exclusive interest to Britons, and as having 
little if any bearing upon the course of affairs in the United States. 

But the conditions in Britain suggest what the conditions in 
America may be in the course of not so many years if present tend- 
encies are permitted to go on unchecked or undiverted. That the 
time is come for earnest consideration of European experience is 
amply proved by the trend from farm owner to farm tenant in the 
United States, which is accompanying the trend from farm to city, 
and is clearly indicated by the figures of the last census. In ten years 
the number of American tenant farmers increased by 329,712, or 16 . 2 
per cent, while the number of farmers operating land owned by them 
increased by only 295,399, or 8.1 per cent. Even today there are 
nearly two and one-half million farmers in America who rent the lands 
they cultivate, as compared with four million farmers who own their 
farms. Should the relative rate of increase continue for another ten 
years, the actual increase in number of tenant farmers would be nearly 
50,000 greater than that of farmer-owners. 

With two and one-half million tenant farmers America already 
has a bigger problem, in point of numbers, than has Great Britain. 
The problem is not so serious yet, largely because of the area of the 
United States and the newness of our agricultural development, but 
it is serious enough to command careful attention. The unsolved 
farm land tenure problem in the United States is largely responsible 
for the annual migration into Western Canada of hundreds of thou- 
sands of good American farmer citizens. One man from central 
Ohio had been making for the landlord as much as $9 per acre per 
year on a 170-acre farm, and the result was that the owner valued the 
land upon the basis of a $9 annual income, which is a little better than 
5 per cent on $175. The more profit he made the farm yield, the 
greater became the share that the owner received, and the higher he 
placed the value of his land, and the farther out of the reach of the 
tenant's purchasing power the land went. 

In time the farm tenure problem will become as acute in the 
United States as it is in the British Isles. Perhaps in the future we 
shall have laws limiting the area of farm lands which one man may 
own, and fixing the terms upon which he shall rent it. At present, 
however, we have two and one-half million tenant farmers and five 
million tenantless, uncultivated, unplatted farms. They should be 
brought together. 



LAND TENURE AND LAND POLICY 673 

214. WHEN TENANT FARMING IS DESIRABLE 1 
By J. W. FROLEY 2 

Speaking generally, tenant farming is not a type to be encouraged 
in America. Nevertheless, tenant farming is here. It is a fact. 
There is, besides, a place for tenant farming in American agriculture. 
Cheap, fertile farms are largely a matter of the past. The homesteads 
of the West are practically gone. If a young man desires to go into 
farming in these days, he requires considerable capital. It takes a 
long time, working out by the day or month, to acquire that capital, 
and good land is expensive. If he wishes to buy a farm, it usually 
takes all the money and credit at his command to buy the land alone. 

The acquisition of the land is only the beginning of the struggle. 
Investigations have shown that in farming only about half the capital 
required is invested in the land. The remainder is invested in build- 
ings, fences, farm machinery, tools, and live stock, sufficient cash 
being kept on hand for running expenses. Many a man buying a 
farm will put all his money into the land and then struggle the remain- 
der of his life with insufficient working capital, trying to meet expenses 
and make the farm earn its equipment. A mere existence rather than 
a living is too often the result. 

Should the same man let someone else furnish the farm and put 
his own money into the working and proper handling of it he would 
require much less capital. He would be relieved of a large burden of 
debt, and with adequate equipment and cash on hand the farm would 
be run far more efficiently and, generally, to his greater profit. 

There is a place, then, in our present agricultural system for tenant 
farming. A man who has acquired some money, as a laborer or other- 
wise, who desires to be independent but who has not sufficient money 
or credit to buy and efficiently equip a complete farm, may let some- 
one else furnish the farm while he furnishes the labor and part or all 
of the equipment and other working capital. Whether the results of 
such an arrangement are mutually satisfactory depends upon the 
establishment of a system of renting which shall provide for a cropping 
and fertilizing practice which will produce satisfactory returns in the 
present but also safeguard the future fertility of the farm. The terms 
of the lease must also be such as to secure a fair division of returns 
between the owner and the renter, and give the tenant a permanent 
attachment to and interest in the farm he works. 

1 Adapted from Farmers' Bulletin 437, pp. 4-5. 

2 C. Beaman Smith, joint author. 



674 AGRICULTURAL ECONOMICS 

D. Land Policy and Land Reform 

215. THE EFFECTS OF OUR PUBLIC LAND POLICY 1 
By BENJAMIN H. HIBBARD 

In looking back over the history of the United States land policies 
what judgment is to be passed upon them ? As a means of deriving 
a federal revenue the failure has been complete, since more money 
has been paid out than has been received in connection with the public 
domain. The next main plan was to put the land into the hands of 
those who needed it and who would use it. This idea came to per- 
meate the views of many congressmen a hundred years ago, and after 
some forty years of struggle and debate the principle was put into 
complete practice so far as the Homestead law was applicable. There 
were in Congress and in the administrative offices a number of men 
throughout the long period of debate who wished sincerely to devise 
means of holding the land out of the clutches of speculators and secure 
it to settlers. This policy requires clearer vision for its realization 
than any number of these leaders had. To put land into the hands 
of settlers was no guarantee that it would stay there. The pre- 
emption laws prescribed settlement and improvement only till such 
time as payment should be made, after which the land could be dis- 
posed of at will. The Homestead law was, and is, the outstanding 
example of land given to settlers in such a manner as to compel its 
retention for a considerable time by the settler. And this was for 
but five years. Where the law was rigidly enforced it was difficult 
for a man to get hold of more than 160 acres of land under the Home- 
stead Act, but it was not difficult, by collusion, to hire men to home- 
stead for the owner of a herd of cattle and so keep the strategic 
points in the hands of a few men. Or it was not even necessary to 
resort to illegal means. The man interested in holding a big tract 
of land was in a multitude of instances able to do so by buying out 
the homesteader who was fortunate enough to get hold of the desir- 
able tracts from the settler's standpoint. This sort of thing did not, 
and could not, take place where most of the land was desirable for 
agricultural purposes. The worst feature of the Homestead law was 
its extension over land not adapted to it. It was designed for the 
western part of the humid belt of prairie land and by no means for 
the arid and the forested regions, yet many a useless homestead was 

1 Adapted from Monthly Bulletin of Economic and Social Intelligence (Inter- 
national Institute of Agriculture), January, 1916, pp. 115-17- 



LAND TENURE AND LAND POLICY 675 

taken in the arid sections, and many a quarter-section of land valuable 
for timber only was secured through the farce of homestead require- 
ments. 

Speculation ran riot because there was no way devised for holding 
it in check and because great tracts of land at a low price are always 
tempting to the man with money to invest. Not many great estates 
were formed out of this cheap land. It was nearly always the pur- 
pose of the speculator to sell within a short time. Since the buying 
of great holdings was largely several years in advance of settlement 
and no small part of it in boom years such as 1835 and 1836, and again 
just preceding 1857, the speculator was in the majority of instances 
disappointed. He sold out for what he could get, and few fortunes 
were made. Nevertheless, the process resulted in making the settler 
who eventually came to till the soil pay a higher price for the land 
than would have been necessary had it been held by the government 
until such time as it was wanted for real use. 

The policy most open to criticism is that of granting such princi- 
palities to railway companies. No doubt the policy encouraged rail- 
way building, but no doubt also railways were built too rapidly. 
They anticipated business by too long a period, were built by men who 
had had little or no experience in the railway world, and were destined 
to fail. There is abundant evidence to show that railways could have 
been built, and would have been built in all but a few cases, as soon 
as there was much need for them, without the great gifts of land. 

One sorry effect of the great liberality of the land policies by which 
settlement was encouraged, and almost never restrained, was the 
almost unbelievable rapidity of settlement of the western country. 
Population and grain production doubled throughout the great grain 
states in periods of about twenty years, and this at a time in the 
development when it meant the addition to the farm area of 50 or 60 
million acres of farm land and six or eight millions of people per decade. 
The result was ruinously low prices and a discouraged and restless 
farm people. 

There were no colonization plans such as have been followed in 
various other countries. The settlement was strictly on the laissez 
faire plan. Settlers took their chances of being able to get community 
privileges. Whether they had schools, churches, or markets depended 
on their own sagacity and good fortune. 

The people who settled the western country were from our eastern 
states and in no small measure from Europe, although the newly 



676 AGRICULTURAL ECONOMICS 

arrived immigrant was seldom on the very extreme of the frontier. 
Without important exceptions the first settlers were poor. Few 
people who possessed even a few thousand dollars left their old homes 
to make new ones in the wilderness. Often such people followed 
along a few years later and bought out for a few hundred dollars the 
farms of the frontiersmen who in turn moved on and repeated the 
program of settlement of new land. 

The United States can hardly be said to have had or to have a 
land policy. The great share of the public domain has passed into 
private hands. It is idle to expend much energy in speculating on 
what might have been done in a better way. In a rather blind manner 
Congress throughout a hundred years of time was trying to get the 
public domain into the hands of settlers. During the first third or 
more of that period it was hoped that incidentally a goodly revenue 
would be derived from it. During two-thirds of the period there was 
a strong feeling that the amount of land was inexhaustible. At times 
there was fraud and graft, but this was the exception so far as Con- 
gress itself was concerned. That fraud was practiced upon the govern- 
ment many times is beyond doubt. 

The lack of a policy is the mos't conspicuous occasion for criticism 
of the acts of Congress relating to the federal domain. Politics often 
played the major role. At present what is needed is a plan by which 
the government may administer the affairs of land yet in its hands 
in such a manner as to result in putting it into the hands of people 
who will use it for production instead of exploitation. Likewise the 
state governments need land policies both with respect to land which 
they still possess and land which in private hands is being used with 
a view to speculative gains to the present owner, resulting in hardship 
to the man who actually undertakes to turn a portion of it into a farm. 

216. OUR LAND POLICY AS IT IS AND AS IT SHOULD BE 1 
By HENRY GEORGE 

The best commentary upon our national land policy is the fact, 
stated by Senator Stewart, that of the 447,000,000 acres disposed of 
by the government, not 100,000,000 have passed directly into the 
hands of cultivators. If we add to this amount the lands which have 
been granted, but not delivered, we have an aggregate of 650,000,000 

1 Adapted from Our Land and Land Policy, pp. 11, 89, 92, 98-102. (Pub- 
lished by Doubleday, Page & Co.) 



LAND TENURE AND LAND POLICY 677 

acres disposed of, but only 100,000,000 acres of it directly to cul- 
tivators — that is to say, six-sevenths of the land has been put into the 
hands of people who did not want to use it themselves, but to make 
a profit from those who do use it. A generation hence our children 
will look with astonishment at the recklessness with which the public 
domain has been squandered. It will seem to them we must have 
been mad, for certainly our whole land policy, with here and there 
a gleam of common sense shooting through it, seems to have been 
dictated by the desire to get rid of our lands as fast as possible. 

Is our policy calculated to give to all men an equal chance ? We 
have seen what it is — how we are enabling speculators to rob settlers; 
how we are by every means enhancing the tax which the many must 
pay to the few; how we are making away with the heritage of our 
children, and putting in immense bodies into the hands of a few indi- 
viduals the soil from which the coming millions of our people must 
draw their support. If we continue this policy a few years, the 
public domain will all be gone; the homestead law and pre-emption 
law will remain upon the statute books but to remind the poor man 
of the good time past, and we shall rind ourselves embarrassed by 
all the difficulties which beset the statesmen of Europe — the social 
disease of England; the seething discontent of France. 

Was there ever national blunder so great — ever national crime so 
tremendous as ours in dealing with the land ? It is not in the heat 
and flush of conquest that we are thus doing what has been done in 
every country under the sun where a ruling class has been built up 
and the masses condemned to hopeless toil; it is not in ignorance of 
true political principles and in the conscientious belief that the God- 
appointed order of things is that the many should serve the few. We 
are monopolizing our land deliberately — our land, not the land of a 
conquered nation, and we are doing it while prating of the equal 
rights of the citizen and of the brotherhood of men. 

Nor can we flatter ourselves that the inequality in condition which 
we are creating will right itself by easy and peaceful means. It is not 
merely present inequality which we are creating, but a tendency to 
further inequality. When we allow one man to take the land which 
should belong to a hundred, and give to a corporation the soil from 
which a million must shortly draw their subsistence, we are not only 
giving in the present wealth to the few by taking it from the many, 
but we are putting it in the power of a few to levy a constant and an 
increasing tax upon the many, and we are increasing the tendency 



678 AGRICULTURAL ECONOMICS 

to the concentration of wealth not merely upon the land which is thus 
monopolized, but all over the United States. Even if the large bodies 
which we are giving away for nothing or selling to speculators for a 
nominal price, are subdivided and sold for small farms, the mischief 
we have done is not at an end. The capital of the settlers has been 
taken from them, and put in large masses into the hands of the specu- 
lators or railroad kings. The many are thereafter the poorer; the 
few thereafter the richer. Our whole policy is of a piece — everything 
is tending with irresistible force to make us a nation of landlords and 
tenants — of great capitalists and their poverty stricken employees. 

The life of all the older nations shows the bitterness of the curse 
of land monopolization; we cannot turn a page of their history with- 
out finding the blood stains and the tear marks it has left. But never 
since commerce and manufacture grew up, and men began to engage 
largely in other occupations than those connected directly with the 
soil, has it been so important to prevent land monopolization as now. 
The tendency of all the improved means and forms of production and 
exchange — of the greater and greater subdivision of labor, of the 
enslavement of steam, of the utilization of electricity, of the ten 
thousand great labor-saving appliances which modern invention has 
brought forth — is strongly and more strongly to extend the dominion 
of capital and to make of labor its abject slave. 

When we reflect what land is; when we consider the relations 
between it and labor; when we remember that to own the land upon 
which a man must gain his subsistence is to all intents and purposes 
to own the man himself, we cannot remain in doubt as to what should 
be our policy in disposing of our public lands. We have no right to 
dispose of them except to actual settlers — to the men who really want 
to use them ; no right to sell them to speculators, to give them to rail- 
road companies, or to grant them for agricultural colleges; no more 
right to do so than we have to sell or to grant the labor of the people 
who must some day live upon them, and to actual settlers we should 
give them. Give, not sell. For we have no right to step between the 
man who wants to use land and land which is yet unused, and to 
demand of him a price for our permission to avail himself of his 
Creator's bounty. And we should give but in limited quantities. For 
while every man has a right to as much land as he can properly use, 
no man has a right to any more, and when others do or will want it, 
cannot take any more without infringing on their rights. One 
hundred sixty acres is too much to give to one person; it is more 



LAND TENURE AND LAND POLICY 679 

than he can cultivate; and our great object should be to give every- 
one an opportunity of employing his own labor, and to give no oppor- 
tunity to anyone to appropriate the labor of others. We cannot 
afford to give so much in view of the extent of the public domain and 
the demand for homes yet to be made upon it. While we are calling 
upon all the world to come in and take our land, let us save a little 
for our own children. Nor can we afford to give so much in view of the 
economic loss consequent upon the dispersion of population. Four 
families are not enough to secure the greatest return to labor and the 
least waste in exchanges. Eighty acres is quite enough for anyone 
and I am inclined to think forty acres still nearer the proper 
amount. 

But still the adoption of such a policy would affect only the land 
that is left us. It would be preventive, not remedial. I hardly think, 
agitate as we may, that we can secure the adoption of such a preventive 
policy until we can do something to make the monopolization of land 
unprofitable. What we want, therefore, is something which shall 
destroy the tendency to the aggregation of land, which shall break 
up present monopolization, and which shall prevent future monopo- 
lization. We cannot have any difficulty in discovering such a remedy 
in the adjustment of taxation. 

(Accordingly, Mr. George proposed that the government should 
collect the whole of the economic rent of all land, as a single tax, 
abandoning all other forms of taxation. — Editor.) 

» 
217. TAXATION AS A MEANS OF DISCOURAGING LARGE 

HOLDINGS 1 

Title: "An Act to provide for a graduated tax on land holdings in excess of six 
hundred and forty acres of average taxable lands, and a graduated tax upon 
the income, rents and profits of lands held by lease or rental contract in 
excess of 640 acres " 

Graduated land tax: 

"All persons owning land in this state of taxable value equivalent 
to 640 acres of average taxable value, or less, shall pay the same ad 
valorem tax rate as is levied and charged for all purposes of govern- 
ment against personal or other property in this state ; and any person 
owning land of equivalent taxable value in excess of 640 acres of land 

1 Synder, Laws of Oklahoma, 1909, p. 1558; Laivs of igoy-S, p. 724 {declared 
unconstitutional) . 



680 AGRICULTURAL ECONOMICS 

of average taxable value and not to exceed 1,280 acres of land of 
average taxable value, shall in addition thereto pay upon all such 
excess aforesaid J of one per centum upon such excess; and any person 
owning land of a taxable value in excess of 1,280 acres of land, of 
average taxable value, and not exceeding 3,000 acres of land of an 
average taxable value, shall in addition pay an extra rate of 1 per 
centum per annum on said excess; and any person owning land in 
excess of 3,000 acres of average taxable value and not exceeding 5,000 
acres of land of such valuation, shall pay an extra tax of 2 per centum 
per annum upon such excess; and any person owning land of average 
taxable value in excess of 5,000 acres, and not exceeding 10,000 acres 
of land of such value, shall pay an extra tax of 5 per centum per annum 
upon such excess; and any person owning land of a taxable value in 
excess of 10,000 acres and not exceeding 25,000 acres, shall pay an 
extra tax upon such excess of 10 per centum per annum upon such 
excess; such excess in each case to be levied and collected in addition 
to regular ad valorem tax levied by law and such graduated excess 
shall be calculated upon the basis fixed for taxation upon such land 
exclusive of improvements thereon; until otherwise provided for by 
law, twenty dollars per acre shall be deemed and construed as the 
average value of Oklahoma lands and any number of acres, or any 
fraction of acres of the taxable value of $20.00 shall be treated for 
purpose of this act as one acre of average land, provided, however, 
that 320 acres of land shall be exempt from this tax, regardless of the 
value thereof." 

Leased lands: 

" In addition to other taxes levied, every person holding land under 
lease or rental contract, or title, less than fee simple, the fee of owner- 
ship of such land being in other person or persons, natural or artificial, 
in excess of 640 acres shall pay on incomes, rents, and profits accruing 
to the lessee from such land in excess of 640 acres and not exceeding 
1,280 acres, an extra tax upon such excess of 1 per centum per annum 
upon all of the incomes, rents, and profits, to him accruing therefrom — 

1,280 acres and not exceeding 2,500 acres 3 per centum 
2,500 " " " " 5,000 " 5 " " 

5,000 " " " " 10,000 " 10 " " 

upon incomes, rents, and profits accruing from such excess." 



LAND TENURE AND LAND POLICY 68 1 

218. THE SMALL HOLDINGS MOVEMENT IN ENGLAND 1 
By C. R. FAY 

England has felt the agricultural competition of the United States 
for nearly fifty years and of Canada, Argentina, and Australasia during 
the latter part of that period. Other countries of Western Europe 
have felt it no less than England, but they were better able to meet 
it, because from the beginning they had a strong peasant proprietary.. 
This was particularly suited to the growing of the small products of 
the farm, such as vegetables, fruit, poultry, milk, and pigs, and 
because it was to these products that the trend of international agri- 
culture was more and more inclining in Western Europe. In England 
we have, indeed, always had some small farms, but at the time of the 
agricultural enclosures of a century ago, the small yeoman class, pre- 
served on the Continent by special legislation, was squeezed out of 
existence, as a compact body, by the harshness of the enclosure acts. 

A recent law in England, the Small Holdings and Allotments Acts 
'of 1907, now superseded by the consolidating Act of 1908, is aiming 
to increase the number of small farmers. The Act of 1908 provided 
for the acquisition of land by the County Councils (through compul- 
sory purchase, if need be), to be relet by them to suitable tenants in 
small holdings and allotments of from 1 to 50 acres. The tenants 
have power to purchase, but they have rarely used the power. It 
also encourages the formation of co-operative small holdings and allot- 
ments associations on the one hand, and of co-operative trading 
societies and credit banks on the other. 

That the act is bearing fruit may be judged from these facts: 
first, that in April, 1908, applications had been made for land amount- 
ing to 167,000 acres; second, that since the passing of the act 130 
small holdings and allotments associations have been created, of 
which 10 were in possession of land in July, 1909. 

219. LAND REFORM IN TEXAS 2 
By LEWIS H. HANEY 

We argue it as though our only choice lay between abolishing 
tenancy altogether and a continuous increase in tenancy as at present. 
But tenancy is partly bad and partly good, and it is not desirable that 
all farmers should always own the farms they work. There are many 

1 Adapted from Quarterly Journal of Economics, XXIV (May, 1910), 500-501. 

2 Adapted from Bulletin of the University of Texas, 1915, No. 39, pp. 5-1 1. 



682 AGRICULTURAL ECONOMICS 

good farmers who do not have the capital, or who do not have the 
qualities needed for the responsibilities of independent management 
of a business, and such farmers do well to rent. What we need is to 
foster such conditions as will facilitate land ownership on the part of 
those who are really capable and desirous of being owners. 

We need to remember that in the North and in England there is 
a large percentage of tenancy, but no such tenant problem as ours. 
The trouble, then, is not in tenancy, but in the kind of tenancy. In 
the writer's opinion, it is thoroughly ill-judged to try to give to every 
farmer in Texas the independent management of a farm — or to do 
so to even 90 per cent. 

The mention of different degrees of success with tenancy calls to 
mind another point at which we, the people, are failing to make a 
necessary distinction. There are tenants and tenants. Also there 
is tenancy and tenancy. Is it not folly to talk about "the tenant 
problem" when we are covering things as different as the renting of 
farms "on the halves" and cash rent? As a matter of fact, the 
"share-cropper" who furnishes no capital and pays half the crop to 
the landlord, is not a tenant in the sense that the one who does furnish 
capital and only pays one-third of the crop is a tenant. The former 
is, as a rule, virtually a laborer; and often he would be much better 
off if, instead of being made to go through the motions of real tenancy 
and run the risks of an independent manager, he were hired as a farm 
laborer and paid a monthly cash wage. Until we distinguish the 
problem of the "tenant" working regularly on the halves from the 
problem of the "tenant" who works on the third and fourth basis or 
on a cash rental, we are bound to make mistakes. 

Finally, I would call attention to the distinction between acquiring 
and stealing. It is getting too common on the part of certain radical 
reformers to imply that, because land values are often not made by 
landowners, such values are stolen from society. It is one thing, 
however, to find, acquire, or receive a thing, and quite another to 
steal, filch, or purloin a thing. We cannot think straight on the land 
problem if we are going to assume that there is anything morally 
wrong in owning land. This, that, or the other individual landowner 
may abuse his power; but the general institution of private property 
in land is a question of expediency — not morals. 

Now undoubtedly there are such things as "grasping landlords"; 
but there are also such things as inefficient tenants. There is a prob- 
lem of just rent, though we cannot solve it by any general legislation 



LAND TENURE AND LAND POLICY 683 

as to rates. That any fixed fraction of the gross value of the crop 
cannot be set up as the just rent in all cases, is apparent; for, aside 
from all questions of evasion, rent must be reckoned on the basis of 
net returns, after deducting expenses, while the crop (gross value) 
does not indicate the amount of expense involved. What we need is 
some system of arbitration between landlord and tenant — some land 
court, whose duty shall be to take into consideration the facts of each 
case, including expenses and net return, and bring the parties to 
agreement as to a just rental. 

One warning needed by the cursory student of the land problem 
is that he should beware the glamour of the panacea. It is so easy 
to say, "The whole system is rotten. Let us try a new deal." But 
progress is rarely made by revolution. We must distinguish between 
radical action and progressive reform. It is not necessary to overturn 
all our institutions in order to remedy social ills. A logical program 
of reform based on an analysis of causes would be in part as follows: 

1. Legislation and education to facilitate self-help and to remove barriers 
to progress. 

a) Co-operative organization. 

b) Conservation. 

c) Better relations between owners and tenants. 

d) Modification of homestead law, etc. 

2. Taxation to socialize strictly unearned incomes and give equal oppor- 
tunity. 

a) Tax on future increments in land values. 

b) Inheritance tax. 

pk c) Progressive tax on large holdings. 

3. Regulation of contracts in which experience shows one class is likely to 
be overreached by another. 

a) Establishment of fixity of tenure (with reasonable safeguards). 

b) Establishment of land courts to arbitrate rents and tenure. 

c) Provision for compensation for improvements made by tenants. 

All these things, and more, have been tried and have attained a 
measure of success. They are not based upon bitterness and class 
hatred, and consequently are not so exciting as socialism and the 
single tax. They proceed from a recognition of the fact that the land 
problem is but one phase of a complex mass of imperfections and 
maladjustments which make up" the larger social problem — a problem 
that will always be with us as long as men so multiply as to press upon 
the existing means of subsistence, however much we may minimize 
it through the establishment of more perfect justice. 



XIII 

INTEREST ON FARM LOANS 

Introduction 

We have already noted (chapter v) the part played by capital- 
goods in the productive process. The demand for capital with which 
to equip American agriculture has grown constantly and with tre- 
mendous rapidity, owing first to the enormous geographical expansion 
of our agricultural domain and secondly to recent improvements in 
the technique of the industry. What supply this demand shall equate 
itself with depends, as Professor Ely points out, upon the willingness 
of the people to forego the consumption of all that they produce and 
save some portion of their income for further production. It was 
pointed out in the chapter on consumption that rural populations 
have, in general, shown no lack of foresight or willingness to make the 
sacrifices necessary to such capital accumulations. But it is equally 
evident that the capital accumulated by the agricultural population 
needs to be supplemented by loan funds saved from the wages and 
profits of city employment. Probably the marginal saver is the 
factory hand who is just persuaded by skilful solicitation to put a 
dollar or two from each week's pay into the savings bank or pay it 
as the weekly premium on an industrial life insurance policy. 

But we must not forget that the price of capital use is like all 
prices in that it has two aspects, one the producer's price and the 
other the price that the consumer pays. If the factory laborer was 
induced to make his saving for a reward of 3 per cent and the 
ultimate user of that dollar pays at the rate of 9 per cent, it is 
evident that a high middleman's charge has intervened and that 
actual abstinence is being rewarded only with a " thirty-five cent 
dollar." Section B of this chapter should be read in connection 
with the chapter which follows, for it is in this question of the 
middleman cost of loans that many of the difficulties in our rural 
credits problem arise. 

Likewise we should bear in mind that suppliers and demanders of 
loans do not meet and compete in one great single money market, but 
that the circumstances of their bargaining are more or less separated 

684 



INTEREST ON FARM LOANS 685 

in both time and place. Selection 226 points out numerous reasons 
why the market price of loans should vary in quite the same way in 
which the price of wheat varies at different times and in different 
markets. Where these barriers are artificial in character, wise legis- 
lation will aid in removing them and in giving a high degree of fluidity 
to capital. But so long as the market situation is one in which a 
strong demand meets a relatively scarce supply of loan funds, no 
amount of legislative price-making will make loans cheap. 



A. The Theory of Interest 

220. THE RATE OF INTEREST 1 
By F. A. WALKER 

It has been said that interest is the compensation paid for the use 
of capital. The usual form of statement is that interest is paid for 
the use of money. Broadly speaking, this is not true. Money is, 
indeed, often the agent in effecting the loan of other species of capital. 
But money is not always, in a highly advanced state of industrial 
society, it is, indeed, rarely, the agent in effecting the loan of capital. 
The country merchant buys goods and gives his notes for two, four, 
and six months, promising to pay the price with interest. Interest 
on what ? On money ? No money passed in the transaction. What 
was borrowed was hardware and crockery, dry goods, and groceries. 
The young farmer buys cattle to stock his farm and gives his note, 
promising to pay, with interest: not interest on money, for he has 
had none, but interest on the value of cows and working oxen. 

Let us now inquire how the rate of interest is determined. Since 
the use of capital is a matter of bargain and sale, or of exchange, what 
should determine the rate of interest but the demand for, and the 
supply of, loanable capital? 

If the people of a community be thriving and progressive, the 
demand for capital, to start new enterprises, or to enlarge those 
already established, will be very great. If the community be also 
young, having brought to new fields the social and industrial ideas, 
tastes, and ambitions of an old society, the supply of capital will be 
scanty, and the rate of interest will rule high. 

Is this high rate of interest a hardship ? No, the hardship lies in 
the scarcity of capital. The high rate of interest becomes the active 

1 Adapted from Political Economy, pp. 219-32. 



686 AGRICULTURAL ECONOMICS 

means of removing that hardship, through increasing the supply of 
capital available to meet the demand. Capital is, as we have seen, 
the result of saving. Interest, then, is the reward of abstinence. 
The strength of the motive to accumulation will vary with the reward 
of abstinence. If that be high, the disposition to save will be strength- 
ened, and capital will be rapidly accumulated; if that be low, that 
disposition will be relatively weak, and capital will increase slowly, 
if, indeed, the body of existing capital be not dissipated at the demands 
of appetite. 

We do not say that the strength of the disposition will increase 
proportionally to the increase of remuneration; that it will, for 
instance, be one-fifth greater at 6 per cent interest than at 5 per cent. 
Moral philosophy has reached no such precision in gauging motives. 
But it is certain that, among the same people, and at the same time, 
the higher the rate of interest the stronger will be the motives which 
lead to saving: the more rapid the accumulation of capital. So we 
see that a high rate of interest, instead of being the cause of an evil, 
is really its cure; and that to depress the rate of interest as, for 
example, by force of law, would be to retard the processes by which 
capital is supplied. 

As a high rate of interest is not in itself an evil, so a low rate of 
interest does not necessarily imply a condition which is a subject of 
congratulation. A low rate of interest may mean that the accumula- 
tion of capital has gone on so rapidly as to outrun the occasions for 
its productive use. It may mean that the people are so dull, indolent, 
and unambitious, or the state of society so disordered, that commercial 
and manufacturing enterprises are not undertaken, and no enlarge- 
ment of traditional industries is looked for. A small amount of 
capital more than suffices for such scanty needs. 

The plain facts of interest seem to controvert the proposition that 
in one market, at one time, there can be but one price for equal portions 
of the same commodity. Differing rates of interest in the same mar- 
ket are due (excluding the false interest sometimes paid as insurance 
of the principal) to imperfect competition in the money market. 
Now, perfect competition only exists where there is ample and accurate 
information. In bargains relating to the use of capital, so little is 
known by the parties respecting the supply of and the demand for 
capital, especially where usury laws drive borrowers and lenders to 
shifts and evasions; so much more are men disposed to conceal the 



INTEREST ON FARM LOANS 687 

fact and the extent of their borrowing than of their buying; so much 
does the retainment of the principal depend, in spite of law, upon the 
good faith of the borrower, that the market for the loan of capital can 
rarely be called a good market. All bargains in the " money market," 
as the market for the loan of capital is popularly called, take place 
necessarily upon information imperfect at the best, often of a private 
and confidential nature : hence it frequently happens that, in the same 
market, at the same moment, loans upon equally good security are 
made at different rates. 

Of course, all that has been said of differing rates of interest in the 
same market holds good of different markets; but, wholly in addition 
to the causes which produce those differences, is reason found for 
different rates in distinct markets. Thus it is notorious that, for long 
terms of years, the loan of capital could be obtained, upon what was 
locally regarded as approved security, for 4 per cent in London as 
freely as for 6 per cent in New York, or 8 per cent in Chicago, or 
12 per cent in Iowa or Kansas. Whence these differences ? In some 
degree, doubtless, these successive additions of interest, as capital 
passed westward, were of the nature of insurance on the principal 
sum lent. 

But not all, or even the greater part of the differences which have 
been noted are due to this cause. It is the disinclination of capital 
to emigrate, which allows such wide differences in the local rates of 
interest. This disinclination is due to various causes. In part, it is 
due to the suspicion that strangers may not be fairly dealt with by 
courts and by officers of the law, in cases of seizures or foreclosures. 
In part, it is due to the apprehension of the effect of international 
hostilities, which cause a suspension of interest-payments, if not 
forfeiture of the principal. In part, it is due to the fact that invest- 
ments made at a distance must generally be made through an agent, 
upon whose good faith or sound judgment may depend the fate of 
the principal invested. While these and other causes may operate, 
singly or in conjunction, to create local differences, the main cause of 
such differences is found in the inertia of the owners of capital, making 
them ready to accept lower rates upon the spot than could perhaps 
be obtained with no less safety, through inquiry and effort at a dis- 
tance, and, secondly, in the necessary lack of information as to pre- 
vailing rates of interest and existing degrees of security for the 
principal. 



688 AGRICULTURAL ECONOMICS 

221. CONDITIONS OF DEMAND FOR LOAN FUNDS 1 
By F. W. TAUSSIG 

Production with capital has been aptly described, in Bohm- 
Bawerk's phrase, as indirect or roundabout production. Labor is first 
applied to making tools, collecting materials, perfecting means of 
communication; finally, at the close of preparatory steps which may 
be long and arduous, the enjoyable produce emerges, and emerges in 
much greater abundance than if labor had been applied directly. 
Practically all modern forms of industry are carried on by a prolonged 
and time-requiring process of production. 

Further, production in the most advanced communities of modern 
times is ''capitalistic" in another sense; there is a class, separate in 
the main, of capitalists. The long-maintained application of labor 
in successive steps is possible only if at the outset there has been a 
surplus — if there has been saving and accumulation in some form. 
The persons who do the saving and possess the surplus are commonly, 
though not necessarily, a different set from those who do the labor. 
They hire the laborers in the various stages of the productive opera- 
tions. The creation of capital, and the emergence of interest as a 
distinct element in distribution, are alike the consequences of the 
double process of surpluses saved and of labor applied in roundabout 
ways. 

We have now to note more explicitly that this process means an 
increase in the productiveness of labor. The great modern flour mill 
is more efficient than the modest grist mill of former times. Per unit 
of labor applied, more is accomplished. To make an accurate com- 
parison of labor product between two such cases would call for intri- 
cate computation. On the one hand, the modern mill stands for 
much more of preparatory labor. On the other hand, it is usually 
more durable, and the labor applied to making it continues to play 
its part through a long period, until the mill is worn out and discarded. 
The later labor in the series — that done by the current workers in the 
modern flour mill, who turn out their thousands of barrels a day — 
seems much more effective than that of the old-fashioned miller; 
because we do not ordinarily think of the preliminary labor embodied 
in the plant as engaged in milling. That, even so, the efficiency of 
all the labor engaged, of earlier as well as of later date, is greater, is 

1 Adapted from Principles of Economics, II, 7-15. (Copyright by The Mac- 
millan Co ) 



INTEREST ON FARM LOANS 689 

shown by the simple comparison of prices: flour is vastly cheaper 
(that is, the excess in price of flour over grain) than in former days. 
So in the railway: there has been an enormous application of capital — 
that is, of previous labor — with an outcome of transportation rates 
so low as to prove that, taking account of all the labor of construction, 
maintenance, and operation, its efficiency is immensely greater than 
that of the simpler instruments of pack horse and wagon. 

This consequence has sometimes been stated by saying that capi- 
tal is productive; a phrase which must be used with care. The 
strictly accurate statement is that labor applied in some ways is more 
productive than labor applied in other ways. Tools and machinery , 
buildings and materials are themselves made by labor, and represent 
an intermediate stage in the application of labor. Capital as such 
is not an independent factor in production, and there is no separate 
productiveness of capital. When in the following pages the produc- 
tivity of capital is spoken of, the language must be taken as elliptic, 
expressing concisely the result of the capitalistic application of 
labor. 

Supposing capitalistic ways of production to have been so settled 
and established as to be known to all and that they are equally avail- 
able for all, then competition will bring the return in all channels of 
investment to the same level. What will determine that uniform 
level ? 

All the constituent parts of capital, though they will yield the 
same return to those employing them, will not necessarily affect to 
the same degree the productiveness of labor. Some may be, and 
almost surely will be, more helpful in production than others. Imagine 
that a community, once in possession of a stock of tools and appliances, 
is compelled to part, by successive steps, with instalments of this capi- 
tal. Clearly it would first relinquish those parts which contributed 
least to the efficiency of labor, and then, as more and more had to be 
given up, would relinquish others in the inverse order of serviceable- 
ness. It would reserve to the very last those constituents of capital — 
that is, those means of roundabout production — which added most 
to the efficiency of labor. These means — the last to be given up, the 
first to be used under existing conditions — would probably be, on the 
one hand, the agricultural processes which, in the temperate climate, 
involve seasonal operations, such as seed and farming tools, and about 
a year's surplus of food; and, on the other hand, the metallurgical 
processes which yield iron, the prime requisite for almost all tools. 



690 AGRICULTURAL ECONOMICS 

Under such conditions the gain, or premium, or interest, which the 
owners of capital will secure, will be determined by the least produc- 
tive use of capital; or, to be accurate in language, by the addition to 
the ultimate product of labor which results from the least effective 
phase of the roundabout or capital-using process. Those who use 
capital in ways more effective than the least cannot retain the superior 
gain for themselves. Since all who have capital at command can 
turn to these more effective ways, competition will prevent any one 
set of persons from securing especially high gains from them. It is 
the productivity of the last or marginal instalment of surplus or 
capital (last in the order of productivity) that determines the rate 
of gain for all capital. 

Bohm-Bawerk and some recent American economists have devel- 
oped the theory of interest in a somewhat different manner, calling 
attention to the indefinite increase of the output per unit of labor by 
resort to more and more capitalistic and roundabout processes, an 
increase, however, which does not take place continuously at the 
same pace. This decline in the rate of increase of production, or 
diminishing return to capital, may be likened to the obstacle encoun- 
tered in pulling a stout rubber band: it can always be stretched 
a bit more, but each additional application of force means a lessened 
effect. 

In this view, it will be seen, differences in productivity and mar- 
ginal productivity appear not only on taking a cross-section of industry. 
at a given moment, but in the development of industry over the 
course of time. The tendency to diminishing gain in efficiency may 
indeed be counteracted by inventions and improvements. But in the 
absence of such progress, the marginal increase of gain tends to sink 
and so, too, the rate of return on capital; and it sinks gradually and 
with some degree of regularity. Since the Industrial Revolution, the 
progress in the arts has been such as to support the proposition that 
the increase of savings and of capital has brought and will bring 
greater efficiency of labor without visible limits. How long it will 
continue cannot be predicted. 

However that may be, there seems to be substantial agreement 
among modern economists concerning the main conclusion stated 
above — that, at any given period, the rate of return on capital depends 
on the gain in productiveness from the least effective part of the 
capital. Whether or no it is believed that there is a separate produc- 



INTEREST ON FARM LOANS 691 

tivity of the capital as distinct from the labor, and whether or no it 
is believed that the differences in the productivity of capital show 
themselves through a process of diminishing returns, it seems to be 
agreed that the factor which determines the rate of interest on capital 
used for production (so far as it is dependent on demand) is the gain 
in efficiency or output accruing to the last or marginal instalment of 
capital. 

222. FACTORS DETERMINING THE SUPPLY OF CAPITAL 1 
By RICHARD T. ELY 

Why is the supply of capital limited ? This question leads us to 
examine the nature of the supply of capital. Imagine a society with- 
out capital carrying on its productive processes by the use of labor 
and land only. So long as the members of this community produce 
only what they consume directly or so long as they spend all their 
money incomes (if a money economy may be imagined to prevail 
despite the absence of capital) for things used up immediately in the 
satisfaction of their wants, there will be no accumulation of capital. 
In order that capital shall be furnished, it is necessary that some 
members of the community turn aside from the production of things 
that are used in the immediate satisfaction of their wants and devote 
their time to the production of goods that will be used in further pro- 
duction. Whether they do this on their own account, or whether 
they are paid for it by others, some postponement of the satisfaction 
of wants is necessary. In the one case those who produce the capital 
goods give up temporarily the satisfactions which they might have 
derived from the consumption goods which they could have produced. 
In the other case, those who are devoting part of their money incomes 
to the payment of those who are producing capital goods are giving 
up the immediate satisfactions which they might have secured with 
the money. In either case the production of capital involves the 
sacrifice of waiting on the part of some members of the community. 
But why should waiting be called a sacrifice ? Do not those who give 
up present satisfactions in order that capital goods may be produced 
get a full repayment if they get back in the form of the products of 
their capital goods as much as they, for the time being, give up ? In 

1 Adapted from Outlines of Economics, pp. 420-22. (Copyright by The Mac- 
millan Co.) 



692 AGRICULTURAL ECONOMICS 

other words, why should capital not be furnished for productive pur- 
poses if those who furnish the capital get back the exact equivalent 
(in value) for the amount of capital they have supplied ? Why should 
an extra payment, in the form of interest, be necessary to induce 
saving ? 

The answer to these questions is found in the difference between 
present and future values. Our present wants are more intense than 
our present estimates of our future wants of a similar kind. We 
visualize the present more vividly than we do the future; we yield 
sometimes to the temptation of satisfying the more trivial wants of 
the present, even when we know that we are thereby rendering uncer- 
tain the satisfaction of more important wants in the future; and when 
we take considerable periods of time into account, we may reasonably 
say that the uncertainty of life itself gives us some ground for pre- 
ferring present to possible future satisfactions. Notwithstanding the 
vast difference between civilized men and savages in this respect — 
for many of the latter seem to have absolutely no regard for future 
needs — the fact still remains that waiting is a sacrifice, and in order 
to induce the saving that is a prerequisite to the use of capital in 
industry, a premium or reward for waiting has to be paid in the form 
of interest. This fact is the most fundamental thing in the explana- 
tion of interest. 

To be sure, some savings would doubtless be made even if interest 
were not paid, owing to men's natural desire to provide for old age, 
for their families in case of the death of the breadwinner, or for the 
mere pride of accumulation. None of these motives would in them- 
selves induce men to invest or lend their saved funds in productive 
undertakings if no interest at all were paid. In fact, this would be 
a matter of indifference, for savings might just as well be hoarded. 
But a very low interest premium would suffice to overcome this indif- 
ference and to bring about their investment in productive under- 
takings. Even this low interest rate, however, would be sufficient to 
balance, in some additional cases, the difference between the intensity 
of present wants and the intensity of future wants, so that in these 
cases, in turn, spending and saving would be a matter of indifference — 
an indifference that would be in its turn overcome by a slight increase 
in the interest rate. In a similar way every increase in the interest 
rate would induce more persons to save and would induce many 
of those who were already saving a part of their incomes to save 
a larger proportion of them. At any given time, accordingly, the 



INTEREST ON FARM LOANS 693 

rate of interest is considerably higher than would be necessary to 
compensate for a large part of the waiting that devolves upon those 
who furnish capital funds for productive purposes. It is just high 
enough, however, to be a recompense for marginal waiting, which is 
the waiting that would not take place if the interest rate were any 
lower. If the interest rate is 5 per cent, a dollar today is worth a 
dollar and five cents a year from today, not to all savers, but to the 
marginal savers. 

B. Other Factors in the Cost of Loans 
223. GROSS INTEREST AND NET INTEREST 

Economists have been in the habit of drawing distinctions between 
true and false interest, gross and net interest rates. Thus Walker 
(Political Economy, p. 225) says: 

A great deal that is paid under the name of interest is not interest in 
the true sense, but is merely a premium for the insurance of the principal 
sum lent. Real interest comprises only that part of the payment made 
which would be paid were the return of the principal, at the date of the 
maturity of the obligation, a matter of reasonable certainty. Where the 
risk is so small that it amounts to nothing in the mind of the lender, as in 
the case of British consols or of a "bottom mortgage," where the sum lent 
is only a half or a third of the value of improved real estate, we have an 
instance of real interest, pure and simple. While this real rate of interest 
may be as low as 3 per cent, loans on various kinds of fair security may range 
from that rate up to 5 or 6 per cent; and note-brokers are all the time 
"shaving" the paper of second and third rate dealers at from 10 to 20 per 
cent discount. 

Professor Ely likewise mentions this element of recompense for 
risk, but notes also that what is called an interest payment often 
includes some element of return to the labor of supervision. He says 
(Outlines of Economics, p. 437): 

While pure interest is the amount necessary to recompense marginal 
waiting, actual interest often includes some payment for the supervision 
which the capitalist has to maintain over his investment. Even the man 
who "lives on his income" usually has to devote a certain amount of time 
to the investigation of the safety of different possible investments, to the 
collection of interest and principal, and similar things. The net earnings 
of a savings bank — the difference between the interest they get on their 
investments and the interest they pay their depositors — are partly a pay- 
ment for this element of supervision. 



694 AGRICULTURAL ECONOMICS 

224. HOW TO LOWER THE COST OF BORROWING 1 
By CHARLES G. TAYLOR 

As an example of the cost of getting money to the farmer, it is 
known that for five year loans bearing 8 per cent interest, farmers 
often pay a flat commission of 10 per cent, that is, the farmer gets 
only 90 per cent of what he borrows, and pays 8 per cent on the face 
of his note. If this expense is amortized for the five year period, the 
effective rate of interest is 10.6 per cent. While all farm loans are 
made on this basis, the expenses and interest rates are higher than on 
other investments. On very small loans the rate is often much higher, 
yet there are frequently conditions present which justify the rate and 
it is not with such cases that life insurance companies can be expected 
to deal. The toll exacted from the borrower for services performed 
prior to his receipt of the money depends frequently upon his neces- 
sities as they are known to the loan broker. These loans are made 
for short periods, sometimes for one year, frequently for five years, 
rarely for longer periods, and generally do not give the privilege of 
curtail before maturity. The first cost would not be so burdensome 
if spread over a longer period. When the date of maturity of the 
farmer's note arrives, frequently he has spent in other improvements 
the surplus income that could have been applied to reduce his loan, 
had he been required or permitted to do so, and he is far too frequently 
forced to renew, and face a repetition of the heavy expense which he 
paid to secure the first accommodation. Had the loan been curtailed 
from time to time, a renewal without expense should not be difficult 
in view of the increased security. Probably some education of the 
farmer on the desirability of the annual curtail would be necessary in 
some sections, but that the plan will, when understood, be received 
favorably is illustrated by a recent prospective borrower who expressed 
surprise and delight when required by a life insurance company to 
make an annual curtail, stating that his debt would have been paid 
years before had he been given that privilege. In the minds of many 
gentlemen present such interest rates and commission charges will 
no doubt be taken to indicate very poor security and very poor credit, 
but these facts are true as to men who deserve credit rating of the 
highest character, and have security to offer, the value of which can- 

1 Adapted from an address at the Ninth Annual Meeting of the Association 
of Life Insurance Presidents, New York, December 9 and 10, 19 15 {Proceedings y 
pp. 45-58). 



INTEREST ON FARM LOANS 695 

not be questioned. When the money must be had for development, 
and there are no other means of securing it except through local 
agencies, which usually control the field and demand the pound of 
flesh, what is the farmer to do ? Not to accept the condition imposed 
means not to go ahead, that is, not to increase his farm facilities, or 
acreage, while to accept means to do this at a smaller profit than 
would otherwise be made. Where the farmer is wise and objects to 
the commission charge, the result often is that the lender, if a non- 
resident, is advised that the rate must be lowered, while the agent 
still continues to collect the customary large commission. It is not 
the purpose of these remarks, however, to bring the loan agent into 
disrepute. His position is natural so long as he can corner the 
market, or when there is difficulty in securing foreign capital. 

The security behind a well selected farm mortgage is just as valu- 
able and dependable as the values upon the faith of which railroad, 
industrial, or other like securities are issued. Why then should the 
farmers' interest rate be, in good localities, 50 per cent, 75 per cent, 
or 100 per cent more than the rate paid by the railroad, the merchant, 
the manufacturer, or the farmer in another state ? The primary rea- 
son is the absence of a highly organized market for the sale of farm 
secured obligations, or an organization so developed as to bring the 
farmer and lender together without unnecessary and wasteful effort. 
The financial genius of our country has been devoted to educating 
the public to the value of railroad, government and industrial bonds, 
and other forms of corporate securities, and to making them "liquid 
assets" by developing a market in which they may be bought and 
sold at will. Legislative acts have been passed to render attractive 
the obligations of governments. There is competition among the 
purchasers of these securities, hence a favorable rate of interest. No 
concerted, widespread effort under such able financial leadership has 
been devoted to the rural credit problem. The supply of credit 
available to the farmer is largely confined to home sources, and a 
limited number of outside investors. His situation is the reverse of 
other sellers of credit. The competition is among the borrowers for 
money rather than among the lenders for investments, therefore the 
borrowers pay the high rate. 

We buy railroad, government, or industrial bonds, without per- 
sonal knowledge concerning the value of the property securing them, 
because we have faith in the stock market quotations as expressing 
their values, or in the opinion of experts, or the statements of officials 



696 AGRICULTURAL ECONOMICS 

as to the values pledged as security for the bonds. In either event, 
we must have confidence in the integrity of some person or organiza- 
tion and must maintain an organization for getting together the facts 
relating to the investments and following their course after purchase. 

The desirability of a farm loan depends briefly upon the value of 
the land, and the title to it, the character of the man owning and 
working it, and the methods he employs. There are no insuperable 
difficulties involved in judging these factors. There are capable men 
all over the country who have been making farm loans successfully 
for years. There are many others equally capable of judging farm 
values, farming methods, and the character and credit of the farmer. 
We need an organization large and strong enough to command com- 
plete respect and confidence for the handling of farm loans from the 
initiation of the application to the completion of the last details of 
the loan, an organization in which the investor could have absolute 
faith and yet one which would be in direct touch with the borrowers, 
eliminate unnecessary intermediary costs, and consider his interests 
fairly. Without some such organization the present difficulties can- 
not be fully removed. 

Why should not the same genius, responsible for the creation of 
the marvelous organizations gathering in life premiums of from five 
cents a week to thousands of dollars a year, be able to perfect an 
organization which will permit the investment of a portion of the 
resulting funds so as to solve a great national problem and benefit a 
large portion of our population? 

In consideration of these premiums the companies annually assume 
liabilities of billions of dollars upon human lives selected through an 
organization which has proven itself reliable. Why not an organiza- 
tion of approved appraisers and title examiners modeled after the 
present medical and agency organizations ? 

"Big operations and low operating costs" is a modern business 
watchword. If the amount of investment necessary to accomplish 
the purpose in question should be too great for any one company, why 
should not this Association, or one like it, undertake to work out some 
co-operative plan by which life insurance funds may be loaned to 
farmers on terms of payment suited to their needs, at a fair rate of 
interest and at a minimum of expense ? The development of a nation- 
wide organization for handling farm loans would immediately stimu- 
late public confidence in such investments and create a ready market 
therefor. Again, by giving the farmer a reasonably long term for 



INTEREST ON FARM LOANS 697 

the payment of his loan, and requiring an annual curtail maturing at 
periods best suited to local conditions, the account would be made 
sufficiently liquid, even in stringent times, to satisfy the demands of a 
life insurance company. When financed in this manner, it would be 
an easy matter for the farmer, if pressed for funds when payments 
mature, to secure locally temporary accommodation to enable him to 
meet maturing payments. 

What the farmer can do. — We have said much about what the com- 
panies can do to get closer to the farmers. But men do not seek to 
get closer to those who are not attractive, and money, being directed 
by men, does not seek unattractive fields. The farmer must do his 
part. Individually, he can help by not attempting to borrow too 
great a percentage of his property value, thus making his security 
more attractive; by being careful to see that his remittances to cover 
maturities reach the place of payment on time or a day or two in 
advance rather than whenever it suits his convenience; by maintain- 
ing in good state of repair the improvements on his land; by improv- 
ing his methods of cultivation so as to build up rather than to wear 
out his land; by supporting legislative measures giving to foreign 
capital every safeguard and protection which may be reasonably 
expected. 

The farmers' organizations may do more by advertising to the 
world the substantial value of the lands which its farmers own rather 
than the speculative and untried opportunities thereof; by organizing 
for collective rather than individual bargaining for credit and thereby 
eliminating much of the present expense; by preaching constantly to 
their members the importance of a fair and reasonable attitude 
toward foreign capital; by urging upon their members the importance 
of promptly meeting their obligations in accordance with the terms 
of the bond or mortgage; by seeking to learn the desires and require- 
ments of foreign lenders so that local conditions may be conformed 
thereto, if possible; and by advocating the passage of laws framed with 
the co-operation of those to be attracted thereby, and calculated to 
render in all respects less difficult the lending of money to their 
members. 

The preparation of an abstract of title is responsible for a large 
portion of the expense which we have been discussing. After prepa- 
ration locally, the abstract must be carefully checked by the legal 
department of the company making the loan, and after all this, unless 
some method of state land registration has been adopted, it is merely 



698 AGRICULTURAL ECONOMICS 

a matter of opinion as to whether the title is good or not. The ques- 
tion of land registration is therefore one which presents itself for 
serious consideration by the farmer. 

225. THE TORRENS SYSTEM OF LAND TRANSFER 1 
By JEREMIAH W. JENKS 

No person has had occasion to sell a piece of land, large or small, 
or to borrow money on a mortgage, in any of our states, even including 
the newer ones, without being impressed with the difficulty and 
expense attending our system. Why should not real estate be as 
readily transferred as government bonds or railroad stock ? 

The Torrens system of land transfer by registration of title is a 
system that really accomplishes, in a great measure at least, just this 
desired result. Notice that, in a word, the system differs from our 
own in this: We register a deed, and the deed conveys the title. In 
the Torrens system, the title is transferred by registration; the cer- 
tificate given, a duplicate of the one preserved in the Registrar's 
office, is merely in law a certificate that a transfer has been made, 
and a minute of the nature of the transfer. 

In the countries where this system has been adopted, there is no 
compulsion regarding the registration of land owned by private 
parties. If any landowner wishes to place his property under this 
system, he makes formal application at the Land Transfer office, 
declaring the nature of his title to the land in question, and depositing 
his deeds, abstracts of title, or other evidences of title. The evidences 
of title, together with officially certified survey or plan of the land, 
is then submitted to a barrister and conveyancer, "examiners of 
title," who report to the Registrar or Recorder of Titles on the follow- 
ing points: whether the description of the parcel of land is definite 
and clear; whether the applicant is in undisputed possession; whether 
he appears in justice and equity entitled thereto; whether his evidence 
of title is sufficient to protect him in a suit against him for ejectment. 
If the applicant fails to satisfy the examiner on any one of these 
points, his application is at once rejected. If, however, the applicant, 
being in possession, is able to satisfy them reasonably on all these 
points, even though some technical flaw may appear in the title, 
advertisement of the application is made, and notices are given to any 
who may have an interest, that unless a caveat is filed within a certain 

1 Adapted from The Annals, II, 49-55. 



INTEREST ON FARM LOANS 699 

time, the land will be registered in accordance with the application. 
If the caveat is filed, action is delayed until it is either withdrawn or 
set aside by action of the court, "when the land is brought under the 
operation of this system by the issue of a certificate of title, vesting 
the estate indefeasibly in the applicant." 

This certificate, a duplicate of which is retained in the office, sets 
forth in detail, though briefly, a description of the land, usually with 
a plan or reference to a map, and the exact nature of the holder's title, 
together with a memorandum of all mortgages, leases, or other encum- 
brance of whatever nature. The one paper is sufficient to show the 
exact title, and the government guaranty that this title is correct 
renders all search for " claim" of title, as under our system, entirely 
superfluous. 

This practice of granting an absolute, indefeasible title, guaranteed 
by the government, after due advertisement and service of notice, is 
still one that involves very little risk, though that risk is one of the 
chief objections urged by its opponents. Ireland has brought about 
one-sixth of her land, and the English colonies over 152,000 parcels 
under this system, with almost complete immunity from error. Still 
there is always danger of error and fraud in such registration and 
subsequent transfer, so that the governments deem it advisable to 
provide a fund to reimburse those injured by the act of the govern- 
ment in granting an indefeasible title. From one- tenth to one-fifth 
of 1 per cent of the value of the land, levied when the land is first 
brought under the system and at subsequent transfers by descent or 
devise, is found to produce a sufficient guaranty fund. 

If a person wishes to sell his land, he makes out a memorandum 
of transfer in a simple prescribed form; and this with his certificate 
is taken to the Registrar. The transfer is then entered upon the 
Registrar's book and upon the certificate, and the new owner has the 
indefeasible title, with the government guaranty. So, whenever a 
title is transferred, one folium of the Registrar is enough to show to 
whom the land belongs, and there is no expense for looking up the 
title, no worry or doubt regarding a cloud upon it. That is impossible. 

If only a part of the land named in the certificate is to be trans- 
ferred, the memorandum for transfer is given only for that part. The 
Registrar marks the original certificate and record " canceled" as to 
that part, and a new certificate is issued to its purchaser, while the 
register gives it a new folium. Thus, every person holding an estate 
in land needs only one document to show the exact nature and extent 



700 AGRICULTURAL ECONOMICS 

of his ownership, and the one folium of the register shows the same 
facts, and always — this is worth repeating — his title is absolutely 
indefeasible, as shown by the record. 

A mortgage or lease or other encumbrance is managed in an equally 
simple way. The mortgage or lease is executed in duplicate — one is 
given to the mortgagee or lessee, the other remains in the office. A 
memorandum of the encumbrance is then made upon the certificate, 
and upon the Registrar's book, and the work is complete. When the 
mortgage is paid or other encumbrance removed, a receipt is indorsed 
on the duplicate held by the mortgagee, and a minute of it made on 
the Registrar's book and on the certificate of title. Thus, in any 
case, the folium of the register shows the exact condition of the title. 
A purchaser, too, may rely upon the record, for the government guar- 
antees the title to be as shown on the register. 

In all transactions, present conditions, rights, and claims are 
shown on the one folium, and no one has any interest in going beyond 
that. The title, as shown, is indefeasible; the history of the title — 
all-important under our system — is of no consequence whatever under 
the Torrens system. The total expense under this system is, as will 
have been thought from the simplicity of the plan, much less than the 
sums paid under the old system for abstracts and examination of 
title — in old states not one-tenth as much — to say nothing of the cer- 
tainty of the title and the saving of trouble. After the first entry, the 
cost of which would depend upon the old system, from $5 to $10 
would suffice for the average transfer. 

Note. — Many of the states have taken up this question of the 
registration of land titles within the last few years and ten states now 
have laws providing for such registration. Much of the legislation 
has been defective or inadequate, however. — Editor. 

C. Some Causes of Variation in Interest Rates 

226. INTEREST RATES PAID BY AMERICAN FARMERS 1 
By C. W. THOMPSON 

I shall first present the average short-time interest rates, 
and the average total annual charge on short-time loans, by 
states. 

1 Adapted from Hearings before the Subcommittee of the Joint Committee on 
Rural Credits, 64th Cong., 1st sess., Part 3, pp. 86-108. 



INTEREST ON FARM LOANS 



701 



EXHIBIT A 

Loans to Farmers on Personal Security — Average Rates for Interest and for Total Cost 



Geographic Division 
and State 



New England: 

Maine 

New Hampshire . . . 

Vermont 

Massachusetts 

Rhode Island 

Connecticut 

Middle Atlantic: 

New York 

New Jersey 

Pennsylvania 

East North Central: 

Ohio 

Indiana 

Illinois 

Michigan 

Wisconsin 

West North Central: 

Minnesota 

Iowa.... 

Missouri 

North Dakota 

South Dakota 

Nebraska 

Kansas 

South Atlantic: 

Delaware 

Maryland 

Virginia 



Average 


Average 
Total 


Interest 


Rate 


Cost* 


6.5 


7-7 


6.0 


6.4 


5.0 


6.4 


6.0 


6.5 


6.1 


7-i 


5-9 


6.2 


5-0 


7.0 


5-8 


6.6 


5-9 


6.9 


6.4 


7.2 


6.9 


7-6 


6.6 


7-4 


7-1 


9.2 


6.5 


7.0 


8.3 


9.2 


7-5 


79 


7-7 


8.8 


11. 


11. 8 


9.8 


10.6 


8.8 


9-3 


7-5 


8.8 


6.0 


6.2 


6.0 


7.o 


6.3 


8.2 



Geographic Division 
and State 

South Atlantic— Cont. 

West Virginia 

North Carolina 

South Carolina 

Georgia 

Florida 

East South Central: 

Kentucky 

Tennessee 

Alabama 

Mississippi 

West South Central: 

Arkansas 

Louisiana 

Oklahoma 

Texas 

Mountain: 

Montana 

Idaho 

Wyoming 

Colorado 

New Mexico 

Arizona 

Utah 

Pacific: 

Washington 

Oregon 

California 



Average 


Average 


Interest 


Total 


Rate 


Cost* 


6.2 


6.9 


6.6 


10.2 


8.3 


10. 5 


9.6 


11. 8 


9.2 


II. 4 


73 


8.8 


8.1 


9.9 


10. 


12.4 


8.7 


10.8 


9.9 


12.4 


9.0 


11. 1 


12.5 


15.6 


10.2 


12.2 


11. 1 


12. 1 


10.4 


11. 5 


10.2 


11. 


10.6 


11. 5 


H-4 


13.8 


10. 


11. 1 


8.8 


10.4 


9-8 


11. 4 


8.4 


9.6 


8.4 


9-4 



* Average of estimated total cost, including 
extra charges," as reported by correspondents. 



'discounts, bonuses, commissions, and any other 



The trouble with averages, of course, always is that they merge 
extremes. But I have here a table (Exhibit B) which shows the 
variations in the interest rates reported from each state and the per- 
centage of the total number of reports for each rate. 

These tables refer to all loans made to farmers, by individuals as 
well as banks. The total costs on loans are shown to be lowest in 
Connecticut and highest in the southern and Rocky Mountain section. 
The extreme state average is Oklahoma, 15.6 per cent. 

(Exhibit C showed the variations in interest rate and total costs 
of loans within the state, separate figures being presented for each of 
the nine crop-reporting districts of the state. — Editor.) 

Chairman Moss: In that connection, Mr. Thompson, were there 
any factors pointed out or called to your attention as to what caused 
the variation in the different districts ? 

Mr. Thompson: Yes. Let us take a state like Iowa and note 
just how the figures run there, where the state average is 7 .9 per cent. 
The top row is 7.9, 8.2, and 7 .8. Then, the second row is S . 2, 7.4, 



702 



AGRICULTURAL ECONOMICS 



and 7.4; and in the south, 8.7, 8.2, and 7.2. In other words, 
rate increases as you get away from the financial centers. 



the 



EXHIBIT B 

Short -Time Loans to Farmers on Personal Security — Per Cent Distribution of Replies 
Received According to Interest Rate Reported 





Per Cent of Total Numbe 
Rate 


r of Replies Showing an Interest 


Geographic Division 
and State 


of 




5 Per 

Cent 


6 Per 
Cent 


7 Per 
Cent 


8 Per 
Cent 


9 Per 
Cent 


10 Per 
Cent 


11 Per 
Cent 


12 Per 
Cent 


13 Per 

Cent 

or Over 


New England: 




78.3 
85.7 
89.5 
90.4 
83.3 
88.2 

93-8 
83.3 
84.6 

61. s 
37-6 
39-0 

24.1 
44-9 

8.7 

8.2 

11. 


8.7 
7-i 


8.7 




2.2 




2.2 




New Hampshire 


7.1 
10.5 
4-8 


















4-8 
16.7 






























11. 8 

5-i 
16.7 
12.8 

3-3 

4-6 

.6 

•5 

9.2 

• 5 

• 4 

• 3 














Middle Atlantic: 


1.0 














New Jersey 

Pennsylvania 

East North Central: 
Ohio 














i-9 

20.3 
31.2 
57-1 
64 5 
28.1 

13-5 
28.0 
20.8 
1.8 
1.6 
8.2 
6.0 


.6 

14.8 

26.1 

1.6 

3-2 

15-7 

41.8 
63 -4 
63-4 
5-7 
29.6 
40.7 
66.5 
























0.3 

• 5 

6.2 


• 5 
1-3 
2-3 
1.6 

28.4 


















0.5 


4-i 


0.9 






West North Central: 




1.0 










• 3 
1-7 
3-2 
5-0 
4-9 


2-7 
29-5 
43-6 
42-9 
19.7 


4.0 
2-7 

• 4 
-4 


i-5 

57-3 
18.3 

•4 
• 7 














1.0 




•4 
•4 


1.8 
1-4 

100. 
94-3 
82.6 
90.2 
75-7 


.4 






South Atlantic: 






2.0 
.8 


4-1 
2.0 
4-7 
30 
5-1 


2-9 
9-9 
5-9 
14.8 
82.8 
Si- 1 
38.6 

343 
36.0 
36.5 
61. 1 

7-2 
56.0 

4-4 

12. 1 

2.7 
3-8 
12.8 
12.3 
4-3 
30.8 
50.0 

29.6 
57-3 
42.6 














.8 


1-7 












2.0 

3.0 

11. 7 

2.3 

.6 
17.2 








-7 
4.0 
2-9 
9-1 

1.2 
2-3 

2.0 

• 5 
4.0 

-4 
2.0 

1-3 
2.1 

2.8 

12.5 

1-3 
9.9 


2.0 

7-1 

18.2 

47-7 

11. 8 
26.7 
33-8 
26.2 

90.2 
29.4 
44-9 
69.9 

37-3 
64.6 
55-3 
42.4 
31-9 
30.8 
25.0 

42.0 
29.3 s - 


1-4 

1-5 
2-3 

"".6 

■ 7 


.7 












• 7 


8.8 


Florida 






East South Central: 




45-Q 

279 

2.1 

4.0 


7-i 
4-1 
1.4 
4.0 








2.3 






8-3 






2.7 


West South Central: 




1.0 

2.2 
.8 

1-3 
8-9 
10.6 

5-7 
8-5 
15-4 

3-7 


5-4 

19.4 

6.6 

58.7 
20.3 
12.8 
29.2 
48.9 
23.1 
6.3 

21.0 


1.0 






1.3 


i-3 


2.7 






28.2 






....:. 


2.3 


6.3 


Mountain: 
















1-3 

2.1 
1.9 










4.2 








5-5 








6.4 












Utah... 






6.3 

2-5 

8.0 
17-7 




Pacific: 






1.2 






4.0 
50 








17.7 




7-1 











INTEREST ON FARM LOANS 703 

Representative Hawley: That is, the west side of the state 
has a higher rate than the east side ? 

Mr. Thompson: Yes, except that the northwestern district has 
a lower rate because of its proximity to Sioux City. 

Let us next consider the case of Wisconsin. Wisconsin has an 
average total rate of 7 per cent. The three districts across the top 
[indicating], away up in the northern part of the state, are relatively 
undeveloped, and have the following averages: 8.4, 7.8, and 8.1. 
Coming down to the second tier, you have 7.2, 6.7, and 6.3. Now, 
notice the lowest row, the bottom or southern row, in Wisconsin: 
There you have 6 .8, 6 .3, and 6.1, and you notice the 6.1, the lowest 
average, is for the district nearest to Chicago. 

Senator Smith: It is also the section that has more diversified 
agriculture, selling the entire year through. 

Mr. Thompson: Yes; and it is also a section that has relatively 
a very large amount of local capital available for loans, and that is 
a very important factor. 

Representative Phelan: What is the average rate for Wis- 
consin ? 

Mr. Thompson: The average total rate for Wisconsin is 7 per 
cent. There are other states that correspond to the one I have just 
cited there. Take, for instance, the state of Minnesota. The average 
total cost for the state is 9 . 2 per cent. If you take the tier at the top 
of the state you have 10.6 and 11 .4, the highest rate being in the 
north central part of the state. If we were to take the figures I cited 
for mortgage loans, you would find similar conditions, the highest 
figures being right up there [indicating] in the north central part, 
away up in the woods. The second tier, districts 4, 5, and 6, shows 
8.7, 9, and 9.4. 

Notice the southern districts [indicating]. Their averages from 
west to east are 9, 8.4, and 6.9. The interesting part there is that 
the averages for personal loans vary about 1 per cent between each 
district, while the figures for mortgage loans are practically the same 
in these districts. This is explained by the fact that the mortgage 
rates are dependent upon other considerations than those that estab- 
lish the short-time rates for a given district. In other words, the 
capital that goes into the one presents problems different from that 
which goes into the other. 

Senator Smith: The stable value of the land is the same? 

Mr. Thompson: Yes. 



704 AGRICULTURAL ECONOMICS 

Senator Smith: But the character of the call for money is so 
different that the loan rate on the money must be higher ? 

Mr. Thompson : m Yes; and the sources of supply for the two 
kinds of capital are different. 

Senator Smith: I have in mind that a steady, all-the-year 
demand brings a source of supply at a much lower rate than a tempo- 
rary demand during only a portion of the year. It is the steady 
demand for the money that gets the money utilized and makes the 
use of the money pay. Sporadic demand necessarily does not meet 
with supply as steady demand meets with it, and therefore sporadic 
demand, unless we can do something to help overcome it, must neces- 
sarily place heavier burdens upon the borrower or more difficulties will 
surround him in obtaining it. 

Chairman Moss : The thought that occurs to my mind is this, 
that merchants and manufacturers are almost constant customers of 
a bank, and a farmer is only an occasional customer. 

Mr. Thompson: The reaction from differences in natural condi- 
tions is shown in comparing the figures by districts in Nebraska and 
Kansas. In Nebraska the average for personal loans is 9 . 3 per cent. 
For districts 3, 6, and 9, the eastern row, the rates are 8 .8, 8 .3, and 8.3. 

Senator Hollis : Those are on the edge of the state where the 
soil is rich and business is heavy. 

Mr. Thompson: And rainfall relatively abundant and climatic 
conditions favorable. The western row of districts show rates of 
10.2, 10.6, and 10.4, respectively. 

Senator Hollis : That is in a very dry part of the state ? 

Mr. Thompson: Yes. The same peculiar changes apply if you 
take Kansas or South Dakota or North Dakota; you will find exactly 
the same variation. Also in the case of mortgage rates, you will find 
that they vary in exactly the same way. Here is a table (Exhibit D) 
showing the average mortgage interest rates and average commissions, 
and also the totals, by states. 

You will notice that the commissions are especially high in North 
Dakota, Oklahoma, Montana, and Georgia. You will notice that 
commissions are relatively insignificant in the New England States. 
The question of whether commissions are charges or not depends upon 
the source of the capital. In those states where a relatively large 
fraction of the farm mortgage capital is secured from a distance, from 
the outside, and where, therefore, it is necessary to utilize middlemen 
in order to get the capital to the farmer, there commission charges 



INTEREST ON FARM LOANS 



705 



obtain; on the other hand, to the extent that the capital is supplied 
locally direct to the farmer from the source of capital, to that extent 
the charge will be one straight interest charge, ordinarily. The states 
I have cited, namely, North Dakota, Oklahoma, Georgia, and Mon- 
tana, do receive relatively very large parts of the capital they have 
from the outside, from a distance. 

EXHIBIT D 
Farm Mortgage Loans — Average Rates for Interest and Commission 



Geographic Division 
and State 



New England: 

Maine 

New Hampshire . . 

Vermont 

Massachusetts . . . 

Rhode Island 

Connecticut 

Middle Atlantic: 

New York 

New Jersey 

Pennsylvania 
East North Central: 

Ohio 

Indiana 

Illinois 

Michigan 

Wisconsin 

West North Central 

Minnesota 

Iowa 

Missouri 

North Dakota. . . 

South Dakota 

Nebraska 

Kansas 

South Atlantic: 

Delaware 

Maryland 

Virginia 



Aver- 
age 

Inter- 
est 

Rate 



6.1 
5-3 

5-6 
5-6 

5-7 
5-7 

5-5 
5-5 
5-S 

5-9 
5-8 
5-7 
6.3 

5-7 

6-3 
5-6 
6.2 
6.g 
7.0 
6.3 
6.1 

5-6 
5-7 
6.1 



Aver- 
age 
Annual 
Com- 
mis- 
sion* 



Inter- 
est 
Plus 
Com- 
mis- 
sion 



6.2 
5-3 

56 
5-6 
59 

5-7 

5-6 
5-8 
5-8 

6.1 
6.2 
6.0 
6.6 
5-8 



5-6 
6.1 
6.8 



Geographic Division 
and State 



South Atlantic — Continued: 

West Virginia 

North Carolina 

South Carolina 

Georgia 

Florida 

East South Central: 

Kentucky 

Tennessee 

Alabama 

Mississippi 

West South Central: 

Arkansas 

Louisiana 

Oklahoma 

Texas 

Mountain: 

Montana 

Idaho 

Wyoming 

Colorado 

New Mexico 

Arizona 

Utah 

Pacific: 

Washington 

Oregon 

California 



Aver- 
age 

Inter- 
est 

Rate 



6.2 
6.3 
7-8 
7-6 
9.0 

6.7 
7-3 
8.7 
8.0 

90 
8.2 
6.6 
8.4 

8.4 
8.2 
9-2 
8.3 
9-7 
9.1 
8.6 

7-9 

7-7 
74 



Aver- 
age 
Annual 
Com- 
mis- 
sion* 



Inter- 
est 
Plus 
Com- 
mis- 
sion 



.2 


6. 


• 4 


7- 


.0 


8. 


.1 


8. 


.6 


9- 


• 4 


7- 


.0 


7- 


• 7 


0- 


• 5 


8. 


.6 


9. 


■4 


8. 


.8 


8. 


.6 


9- 


.6 


10. 


■ 7 


8. 


.8 


10. 


.6 


8. 


.8 


10. 


3 


9- 


• 4 


9- 


.8 


8. 


• 3 


8. 


.2 


7- 



*Where the report shows a commission paid once for all in advance on a loan running more 
than one year, the equivalent annual commission is used. 
tLess than one-tenth of 1 per cent. 



The next table (Exhibit E) shows the relative importance of 
instalment-commission, advance-commission, and no-commission 
loans, by states; that is, it indicates the percentages of the total 
mortgage business in each state on which annual or instalment com- 
missions and advance commissions are charged and the percentage 
on which no commissions are charged. 

In certain states, in the New England States, and in the more 
highly developed agricultural states of the corn belt, the averages for 
commissions are relatively low; also the total costs run highest in 



706 



AGRICULTURAL ECONOMICS 



the Southern and Rocky Mountain States, but you will also notice 
that there are variations even between the states in these districts. 

EXHIBIT E 

Percentage of Farm Mortgage Business on Which Commission is Paid 



Geographic Division 
and State 



Percentage 

without 
Commission 



Percentage with Commission 



Total 



With Com- 
mission Paid 
in Advance 



With Com- 
mission Paid 
in Instalments 



New England: 

Maine 

New Hampshire . . . 

Vermont 

Massachusetts 

Rhode Island 

Connecticut 

Middle Atlantic: 

New York 

New Jersey 

Pennsylvania 

East North Central: 

Ohio 

Indiana , 

Illinois 

Michigan 

Wisconsin 

West North Central: 

Minnesota 

Iowa 

Missouri 

North Dakota. . . . 

South Dakota 

Nebraska , 

Kansas , 

South Atlantic: 

Delaware 

Maryland , 

Virginia 

West Virginia 

North Carolina... 

South Carolina.. . 

Georgia 

Florida 

East South Central: 

Kentucky 

Tennessee 

Alabama . . 

Mississippi 

West South Central: 

Arkansas 

Louisiana 

Oklahoma 

Texas 

Mountain: 

Montana 

Idaho 

Wyoming 

Colorado 

New Mexico 

Arizona 

Utah 

Pacific: 

Washington 

Oregon 

California 



8.9 
3-4 
5-9 

2.8 

21.7 
1-3 

13-4 
27.7 
18.6 

26.3 
45-5 
47-3 
23.2 
14.9 

47-7 
64.0 
54-9 
79.8 
68.2 
693 
67.8 

1.9 
35- 7 
34-1 
11. 1 
40.9 
35-3 
66.1 
29.8 

23 -3 
35-4 
37-2 
25-5 

33- 1 
23.2 
91.6 

43 o 

68.9 

64.2 
40.1 
58.3 
41.0 
19 5 
33-0 

S8.2 
31.6 
19.0 



S.o 

3-4 
4-8 
2.7 
11. 7 
1.3 

9-6 
18.7 
10. 1 

17.9 
36.2 
39-1 
18.0 
10.4 

20.0 
Si- 3 

28.0 
17.0 
455 
535 
30.6 

l 9 
28.5 
26.2 

8.8 
27-5 
26.0 
54-1 
18.6 

14.2 
23-9 
25-2 
15-7 

18.6 
16.3 
36.7 
27.1 

28.4 
45-6 
28.1 
47.0 
32.8 
9-5 



3-9 

1.1 
.1 

10. o 



a. 4 
9 3 

8.2 
5-2 
4-5 

27-7 
12.7 
26.9 
62.8 
22.7 
158 
37-2 



7.2 
79 
2-3 

13.4 
9-3 

12.0 

11. 2 
9.1 

W-S 

12.0 

9.8 

14.5 

6.9 

54-9 
15-9 

40. S 

18.6 
12.0 

11. 3 
8.2 

10. o 
14-7 

11. 8 
8.0 
39 



In a state like Oklahoma a total average cost for mortgage loans is 
8.4, of which 6 . 6 is interest and 1 . 8 is (Continued on p. J08) 



INTEREST ON FARM LOANS 



707 



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708 AGRICULTURAL ECONOMICS 

commission. Incidentally Oklahoma is a state that receives a very 
high percentage of its loans from the outside. Our figures show that 
two-fifths of the farm-mortgage capital in Oklahoma is obtained from 
life insurance companies. On the other hand, if you take a state like 
Alabama you will find that the total cost is 9 . 4 per cent, as against 
8 .4, in Oklahoma, but the average annual commission is seven- tenths 
of 1 per cent, and that the nominal charge is 8 . 7 per cent. Alabama 
is a state which receives relatively little money from the outside; it 
is dependent largely on what capital it has at home. 

{Selection 227 on p. 707) 

228. BANK RATES TO THE FARMER 1 
By JESSE E. POPE 

Holmes estimates that in 102 counties of Illinois 921 banks afford 
two-thirds of all the personal credit obtained by farmers and that in 
Vermont the farmers obtain 70 per cent of their credit from the banks, 
while in the southern states of Virginia, Georgia, Arkansas, and 
Mississippi they get from two-fifths to three-fifths of their credit from 
the banks. For the country as a whole, outside the South, he esti- 
mates that from one-half to seven-tenths of the credit to farmers 
comes from the banks. 

Contrary to a common opinion, banks are no respecters of per- 
sons, and if the farmer pays more for his credit than other classes of 
producers, it is because it is more expensive to loan to him. As a 
rule this is the case. In the first place the credit required by the 
farmer is very different from that required by the merchant. The 
term is longer, renewals are more frequent, and partial payments are 
unusual. While the moral risk is good, payments are slow, super- 
vision is more difficult, and the average size of the loan is smaller. 
Although the farmer's current account deposits have shown a decided 
increase in the last twenty years, they are not of sufficient importance 
to warrant the bank in loaning to him against his balance. 

Since the average farmer receives his income in lump sums and 
at infrequent intervals, he makes savings deposits rather than cur- 
rent account deposits. The merchant, on the contrary, receives his 
income in daily increments, which he immediately puts at the dis- 
posal of the banks through current account deposits. Since, there- 
fore, as the banker would say, the merchant is borrowing his own 

1 Adapted from Quarterly Journal of Economics, XXVIII, 726-27. 



INTEREST ON FARM LOANS 709 

money, he is entitled to a somewhat lower rate than the farmer. In 
a community mainly agricultural the large amount of interest paid 
on time deposits imposes a heavy burden on the banks. In the South 
and in the newer states of the West, time deposits usually bring 5 per 
cent and often 6 per cent interest, and as long as such rates must be 
paid to attract and hold free capital in the community, just so long 
must the bank's borrowers feel the burden of high interest rates. 
Finally, since the credit demands of the farmer are not evenly dis- 
tributed throughout the year, the bank often has idle money which 
it must invest in short term commercial paper at a rate lower than 
that charged the farmer for his loan. This is not, however, as is often 
stated, discrimination against the farmer, for if the bank did not 
invest in such paper, he would have to pay a still higher rate for his 
loan. 

D. Making Interest Rates by Law 

229. USURY LAWS AND THEIR ENFORCEMENT 

In order to keep the rate of interest from becoming excessive 
most of the states have put on their statute books laws prohibiting 
the charging of rates above a certain amount, generally not less than 
6 nor more than 10 per cent, though 12 per cent is permitted in 
several of the western states. Such legislation is open to the objec- 
tions that apply to all attempts to make prices by law. If the con- 
ditions of supply of, and demand for, loan funds are such as to strike 
their equilibrium at a figure higher than the one named in the law, 
that rate will be charged in spite of its prohibition. Lenders have 
devised countless subterfuges which make the taking of the excess 
interest fairly safe, and they are protected by the fact that the bor- 
rower is loath to make complaint under the law, because such action 
will only make his condition worse, by making it impossible for him 
to borrow at all. 

In the fall of 19 14, the Comptroller of the Currency undertook 
an investigation of national banks, to learn whether they were in the 
habit of charging usurious rates of interest. He found that the prac- 
tice was decidedly prevalent, especially in the Southwest. In his 
report he cites particularly three national banks in small towns in 
Oklahoma, which averaged 25, 36, and 40 per cent, respectively, on 
all their loans, and two of them ran as high as 147 and 300 per cent, 
respectively, on individual loans. Oklahoma had at the time a usury 
law forbidding rates in excess of 10 per cent. The state has since 



710 AGRICULTURAL ECONOMICS 

endeavored to strengthen that law, and the Comptroller has recom- 
mended that an amendment be made to the national bank act, 
authorizing the Department of Justice to bring suit in such cases 
instead of leaving it to the customer who has paid the excess rate. 

230. "AN EFFECTIVE USURY LAW" 1 
By JOHN FIELDS 

Far be it from me to do or say anything to hinder the folks from 
getting any kind of a law against usury that they think they want. 
The ''30-day" special session of the legislature has surely by this time 
"done its do." And I shall be very happy indeed if the result will 
be that no Oklahoma farmer will ever again pay interest at a rate 
higher than 10 per cent and that 6 per cent or less will be the average 
rate. I confess, however, that I have little expectation of adding to 
my store of happiness from that source. 

It has always seemed to me that farmers would better go fishing 
than to try to do much business on money borrowed at a rate of 
interest higher than 10 per cent. The only purpose for which borrow- 
ing money at such a high rate holds any hope of profit is for the pur- 
chase of a cow, a sow, and a dozen hens. These will work it out, if 
given care and fed home-grown feeds. But those who borrow money 
at 10 per cent or more to buy cattle to be fed or wintered, or to pay 
for food supplies which might have been grown on the farm, should 
not expect legislation to confer prosperity upon them. Make 10 per 
cent your own limit. Stop right there and go out of business before 
you start instead of later as you surely will. 

Of course, it wouldn't do at all to suggest that the law taxing 
moneys and credits may have something to do with high interest rates 
in Oklahoma. Every man's bank account is supposed to be taxed. 
Compare the total of the bank deposits returned for taxation with the 
total bank deposits as shown by the next consolidated statement of 
state and national banks in Oklahoma. This law brings very little 
revenue and it transfers many large bank accounts from banks in 
Oklahoma to banks in other states. Men who have a lot of money 
don't like to get mixed up with an Oklahoma tax ferret, so they put 
the money where he can't find it. But this is a fine looking law and 
must be preserved as an ornament to the statute book. 

But might it not help interest rates a little to give the private 
citizen an even break with banks in the business of lending money on 

1 An editorial in the Oklahoma Farmer, February 10, 19 16. 



INTEREST ON FARM LOANS 711 

personal property ? Banks pay taxes on their capital stock and sur- 
plus. They do not pay taxes on loans. The individual depositor is 
supposed to pay taxes on his deposit in the bank, but the bank's taxes 
are not increased when it lends the funds represented by that deposit. 
But if the depositor makes the loan instead of the bank making it, he 
must pay taxes on that loan or dodge the tax ferret, and the borrower 
must pay taxes on the property mortgaged to secure that loan. A 
farmer cannot lend money to his neighbor on the same terms that the 
bank can make the same loan. Ten farmers cannot pool their 
resources and make chattel loans to their tenants or neighbors without 
having to pay taxes on them. But these ten farmers may start a 
bank with $10,000 capital and lend the rest of their money and all 
they can get from other folks, and escape taxation upon all of it except 
the $10,000. It may be good politics to fine a farmer for saving money 
and lending it to his neighbor but it doesn't look like good business. 
Two earnest and sincere men came to see me some days ago. 
They are farmers and believe that practically all human ills may be 
corrected by the right kind of legislation. We talked things over. 
One of them admitted that he grew his first garden and potatoes for 
home use in 19 15. And he had been farming for 20 years. He said 
that in his locality he was the only farmer who did that much toward 
making the farm produce the living. And we all agreed that at least 
half of the financial troubles which Oklahoma farmers have are of 
their own making and cannot possibly be remedied by any sort of 
laws. 



XIV 
RURAL CREDITS 

Introduction 

Undoubtedly a careful study of the rural credit institutions of 
Europe is an important aid to us in working out better arrangements 
for the United States. That does not mean that we should devote 
all our time to reading the inspiriting accounts of what has been 
accomplished somewhere in Germany or somewhere in France by 
Landschaft bank or co-operative credit union. Before we shall evolve 
a satisfactory working system for American farmers, we must gain a 
deep and intimate acquaintance with our many differing local situa- 
tions, and learn how to operate the old institutions better if they are 
still serviceable, as well as learn how to get the greatest efficiency from 
such new institutions as are coming into the field. 

The present chapter, therefore, aims to go back a step in order to 
examine the manner in which our rural credit problem has come to 
its present posture, and the way in which credit needs have been met 
(however imperfectly) up to the present time. Sections A and B 
serve to give us a little perspective on the problem by taking us back 
over the last generation, showing how farm indebtedness began and 
how private money lenders, merchants, and banks have been serving 
or exploiting the farmer's imperative need of capital. 

Taking these sections with the one that follows (C), it appears that 
there has been a considerable development of these agencies in recent 
years. This reveals the present problem as not so much one of 
fashioning from whole cloth some new type of rural credit institution, 
but rather the conserving and co-ordinating task of standardizing the 
practices, enlarging the vision, and perhaps integrating the organiza- 
tion of agencies already established in a position of usefulness. Section 
C shows several important points at which this work of rehabilitation 
has already made distinct progress. As to just what direction it should 
take or how far it should go, opinions differ, of course. Section D 
has space only for two of the issues — co-operation and state aid. 

Undoubtedly the greatest difficulty in the farmer's position in the 
past has been due to his lack of ready access to the loan markets of the 

712 



RURAL CREDITS 713 

world and the relatively unmarketable form in which his securities 
were presented. Now that agriculture is taking its place in the busi- 
ness world on an even footing with other industries, the farmer must 
learn to compete with other users of capital. The growth of small 
country banks, aided now by the federal reserve system goes far 
toward giving him an adequate machinery for personal credit or 
short time loans. The Federal Farm Loan act provides an essentially 
similar — and thoroughly American — device for making the invest- 
ment capital of the whole country accessible to the farmer for land 
mortgage purposes. If this machinery can be coupled up with vigor- 
ous, self-reliant, and co-operative activity on the part of those who 
need credit in their agricultural enterprises, we may hope, in time, 
to see a large part of the difficulties of this transition era disappear. 



A. The Coming of the Rural Credit Problem 

231. AGRICULTURAL DEPRESSION AND THE INCREASE OF 
FARM MORTGAGES 1 

By J. R. ELLIOTT 

Probably no better proof of the loss of the farmer's relative capital 
power is required than in his growing dependence for his capital on 
the successful men of other occupations. And it certainly is an 
unquestionable indication of coming disaster, if this demand for aid 
by the farmer be growing faster than the increase in the value of his 
possessions. Fifty years ago farm mortgages were rare in America; 
today they are the rule in many localities and everywhere they 
threaten to defy the farmer's efforts to contend with the load they 
create. 

It is claimed of New England that at least 33 § per cent of the 
farms are mortgaged to the capitalists. Few undertake to deny this 
startling declaration. In fact, it is generally admitted. Mr. Heath, 
Commissioner of Labor Statistics of Michigan, has recently reported 
on the mortgage indebtedness of the farmers of his state. He stated 
that he has reports from 90,803 farms, or 58 per cent of all the farms 
in the state. The assessed valuation of all farms reported is $194,- 
854,663, upon which there is a mortgage indebtedness of $37,456,27 2, 
or a little more than 19 per cent of the total assessed valuation, and 

Adapted from American Farms, Their Condition and Future, pp. 45-5:. 
(G. P. Putnam's Sons. Copyright by J. R. Elliott, 1890.) 



<r 



714 AGRICULTURAL ECONOMICS 

nearly 47 per cent on that of the farms mortgaged. The assessed 
valuation of the farms in the state is $335,378,025, upon which the 
estimated mortgaged indebtedness is $64,392,580, with an annual 
interest charge of $4,636,265 on farms alone. 

The opinion of the Labor Commissioner of Michigan, that the 
mortgages upon the farms of that state operate "as a mammoth 
sponge" upon the labor of the owners, is the growing feeling of the 
majority of farmers all over America — the older parts at least. Says 
a southern journal: "Think of it! In as prosperous a state as Michi- 
gan 47 per cent, or nearly half, of the farms are mortgaged. In 
Georgia, if one would take the trouble to examine the clerk's office 
in the different counties, a condition of affairs equally bad, perhaps 
worse, would be brought to light." 

The Bureau of Labor Statistics for the state of Illinois has issued 
reports which show that the farm lands of the state have mortgages 
upon them to the amount of $123,733,098, not including Cook County. 
According to the report of the Commissioner, " the mortgage indebted- 
ness of farmers for borrowed money has increased 23 per cent since 
1880 in this state, twice the increase in the value of farm lands." As 
to Nebraska, official reports do not indicate a happy condition of 
affairs in that state in reference to this matter. The reports of 1887-88 
deal with 215 farmers scattered all over the state. An analysis of 
these reports shows that, of the 215 farms, 113 are mortgaged. 
Seventy-five per cent of the farms of Dakota are mortgaged for an 
aggregate amount of $50,000,000. 

The New York Times of December 27, 1886, contained a long 
article from Mr. Frank Wilkeson on the condition of the farmers of 
Kansas. He said: " It is a financial impossibility in this era of agri- 
cultural competitive warfare for a farmer of average intelligence and 
skill who tills a farm of 100 acres of land, except corn land, to lift a 
mortgage of say $1,000, with money earned by growing staple crops. 
And nine-tenths of all the uplands lying west of the ninety-seventh 
meridian are utterly unfit to produce corn, excepting in excessively 
wet seasons." The picture given of life on Saturday in a Kansas town 
is certainly a startling one: "It matters not how dull the town has 
been during the week, on Saturday the streets are crowded with 
people; on that day chattels are sold to satisfy the overdue mort- 
gages. At present these sales are numerous in the West, outside of 
the corn belt, and a very large portion of these do not realize sufficient 
to pay the mortgages." 



RURAL CREDITS 715 

" Mr. Henry M. McDonald, president of the Traders' Bank, Pierre, 
South Dakota, estimates that the volume of western-mortgage 
business, confined chiefly to Kansas, Nebraska, Minnesota, and 
Dakota, has reached the sum of $150,000,000 yearly. It may exceed 
his figures. That it is of great magnitude is evident from the fact 
that in all eastern cities (and in most of the towns and villages) are 
located numbers of agents who make a living from the commissions 
paid them for securing loans. Boston numbers more than fifty 
agencies of farm-mortgage companies. It is computed that Phila- 
delphia alone negotiates yearly more than $15,000,000 on western 
loans. Kansas and Nebraska have 134 incorporated mortgage com- U^ 
panies. The companies organized under the laws of other states, but 
operating in these two states, increase the number at least 200. In 
this reckoning no account is taken of firms and individuals, although 
a large amount of money is directly invested by lenders of this class." 
One feature of importance to be observed in this mortgage business, 
is the fact that the chief part of the power to put in bonds the lands 
of America comes not from the country, but from the city; while the 
country is gaining no equivalent power over city interests of any kind. 

As to the oppressive nature of the western farm mortgages the 
Chicago Times says: "The syndicates that loan money at from 1 to 
3 per cent per month are mainly made up of Scotch, English, and New 
England capitalists, who have their agents throughout the South and 
West. I These mortgages are falling due, and soon an immense number 
of southern arid western farms will be in the hands of foreign mort- 
gagors. The territories are covered with mortgages on new farms not 
yet patented. In many districts half the settlers borrow money at 
high interest to pay the small price required by the government in 
proving up. This is leading to widespread disaster. The object of 
the pre-emption law is perverted. Eastern and foreign capitalists get 
the land with such improvements as the settler has put upon it. The 
settler loses all by reason of the exorbitant interest he is compelled 
to pay." 

There are those who would fain establish the idea that these grow- 
ing financial embarrassments upon the farms of America are "an 
evidence of thrift rather than the contrary." Borrowed capital has, 
no doubt, enabled many western farmers to push their enterprises 
with a success which they, probably, would not have obtained without 
it. But the payment of the interest on western farms, with wheat at 
80 cents per bushel, is quite a different matter, as compared with the 



716 AGRICULTURAL ECONOMICS 

time when this cereal commanded a price 30 per cent higher. It was 
a different matter when the lands yielded an average of 30 bushels 
of corn to the acre, as compared with 20 bushels now — when heavy 
outlays for fertilizers are required to secure a crop. 

Farm mortgage is a comparatively new disease with the agricul- 
turists of America. Fifty years ago, the farmer who was obliged to 
put a mortgage on his farm was considered next to insolvent, and its 
clearance was thought highly improbable. They are so numerous 
now that their increase is hardly noticed by the rural communities. 
But I believe that at the present day not more than 50 per cent of 
mortgaged farms are released, except by change of ownership. 

232. THE CENSUS REPORT OF 1890 ON FARM MORTGAGES 1 

Farm and home proprietorship and indebtedness were made the 
subject of statistical investigation in the Eleventh Census by special 
act of Congress. No previous census had undertaken a similar work. 
It was due primarily to the efforts of Mr. B. C. Keeler, of St. Louis, 
Missouri. In 1889, at a meeting of the St. Louis Single Tax League, 
he offered a resolution requesting the Superintendent of Census to 
undertake the investigation covered by this report. The idea was at 
once taken up, and various farmers' and labor organizations invited 
to co-operate in the work. "An Address to the People of the United 
States" was sent to every labor, religious, and agricultural paper in 
the country, and to the weekly editions of the great daily newspapers. 
Several boards of trade, the Patrons of Husbandry, the Knights of 
Labor, the Farmers' Alliance and Industrial Union, and many religious 
bodies and labor organizations indorsed the movement and joined in 
requests to Congress to authorize a thorough investigation of mort- 
gage indebtedness in the United States. To these requests Congress 
promptly acceded. 

VALUE AND INCUMBRANCE OF FARMS 

Value. — The farms cultivated by owners and subject to incum- 
brance number 886,957, 2 and the value, as reported, is $3,054,923,165. 
New York has a larger aggregate value of such farms than any other 

1 Adapted from "Report on Farms and Homes: Proprietorship and Indebted- 
ness," Eleventh Census of the United States, 1890, pp. 3-143. 

2 There were, in addition, 2,255,789 farms free of mortgage cultivated by 
their owners and 1,624,433 hired farms. It was not thought practicable to attempt 
to secure statistics as to the incumbrance of this large class of tenant farms. — 
Editor. 



RURAL CREDITS 717 

state, and its amount is $309,352,398; Iowa being second, with 
$305,658,669; and Illinois third, with $285,706,170. More than two- 
thirds of the value of this class of farms in the United States is found 
in the North Central division, and 4 . 63 per cent of the total value 
is in the South Atlantic and South Central divisions. 

Incumbrance. — Upon the owned and incumbered farms there is an 
incumbrance amounting to $1,085,905,960, and there are two states 
in which the amount is at least $100,000,000, namely, New York, with 
$134,960,703, and Iowa, with $101,745,924. There is an incumbrance 
of $98,940,935 in Illinois, and an amount not less than $50,000,000 
nor more than $75,000,000 in each of the states of Kansas, Michi- 
gan, Missouri, Ohio, Pennsylvania, and Wisconsin. In the 3 states, 
Illinois, Iowa, and New York, 30.91 per cent of the incumbrance is 
concentrated; 51 .01 per cent in the 6 states, Illinois, Iowa, Kansas, 
New York, Ohio, and Pennsylvania; and 71.37 per cent in the 10 
states, Illinois, Iowa, Kansas, Michigan, Missouri, Nebraska, New 
York, Ohio, Pennsylvania, and Wisconsin. The smaller amounts 
are found in the Southern states and the Rocky Mountain region. 

There are 4 counties each having an incumbrance of $6,000,000 
and over: Monroe County, New York, and Berks, Chester County, 
and Lancaster County, in Pennsylvania. The last named is the 
most prominent tobacco-raising county in the United States, and 
shows a farm incumbrance of $8,160,269. 

Ratio of incumbrance to value. — While the amount of incumbrance 
unpaid at any time is fixed by contract and by law, the value of the 
incumbered farm is not so fixed and can only be expressed as a matter 
of opinion until it is sold and its value measured in money. The 
average time during which a mortgage on a farm endures from the 
date of its making to the date of its final payment is about 5 years, 
and the opinion is commonly expressed that during the 5 years pre- 
vious to 1890, farm values, independent of new improvements, 
declined in many counties. Correspondence that was had with 
farmers in the pursuit of information leads to the belief that farm 
owners did not allow for the depreciation of value. A frequent 
answer was that there was no sale for the farm, but that its old value 
would some day be restored or that there was little sale for farms at 
any price, but that the farms ought to be worth what they had been 
worth some years previous. The correspondence justifies the impres- 
sion that the farmers rated their farms at the older values when 
higher than present ones. 



718 AGRICULTURAL ECONOMICS 

The incumbered farms that are cultivated by owners are incum- 
bered to the extent of 35 . 55 per cent of their value, and the percentage 
varies among the states and territories from 24 . 23 per cent in Utah 
to 54 .44 per cent in Mississippi. In 2 states the percentage is greater 
than 50; in 3 states between 45 and 50; in 14 states and 1 territory 
between 40 and 45; in 6 states between 35 and 40; in 18 states and 1 
territory between 30 and 35; and below 30 in 2 states and 1 territory. 

OBJECTS OF INCUMBRANCE 

Real estate purchase and improvements. — The purchase of real 
estate, uncombined with any other object, induced 60.63 per cent 
of the farm debtor families to incur 64 .38 per cent of the farm debt; 
real estate improvements, uncombined with any other object, induced 
6.79 per cent of these families to incur 4.53 per cent of this debt; 
and real estate purchasing and improvements, in combination, induced 
3 .98 per cent of these families to incur 5.31 per cent of this debt. 
Among the geographical divisions the North Atlantic division is the 
most prominent as having the largest percentages representing the 
purchase of real estate when uncombined with any other object. 
The Western division has the lowest percentage for purchase money, 
standing alone, but it has the highest percentage for real estate 
improvements, standing alone, namely, 9 . 86 per cent for farm debtor 
families and 6 .36 per cent for farm incumbrance. 

Business. — As an object of farm incumbrance business stands for 
1 .62 per cent of the farm debtor families and 1 .95 per cent of the 
farm incumbrance; in the South Atlantic for 4.13 per cent of these 
families and for 4.73 per cent of this incumbrance; in the Western 
division for 3 . 56 per cent of these families and 3 . 84 per cent of this 
incumbrance; in the South Central division, 2 .43 per cent of families 
and 4 .84 per cent of incumbrance; North Atlantic division, 1 .76 per 
cent of families and 1.98 per cent of incumbrance; North Central 
division 1 .32 per cent of families and 1 .49 per cent of incumbrance. 

Personal property. — The purchase of farm machines, domestic 
animals, and other personal property accounts for 2.77 per cent of 
the farm debtor families and 1 . 19 per cent of the farm debtor incum- 
brance; from the Western division, with 3.41 per cent of families 
and 1 .77 per cent of incumbrance, to the South Central division, with 
0.92 of 1 per cent of families and 0.60 of 1 per cent of incumbrance. 

Farm and family expenses. — This is distinctly the " calamity " 
class, but perhaps every incumbrance that has been admitted to this 



RURAL CREDITS 



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720 AGRICULTURAL ECONOMICS 

class would not be considered an evidence of calamity, as, for instance, 
when a parent mortgages his farm or home to give his son a liberal 
education. The two geographical divisions embracing the Southern 
states are the most prominent ones with respect to farm incumbrances 
made on account of farm and family expenses. In the South Central 
division, 18 .73, and in the South Atlantic division 18 . 15 per cent of 
these families incurred 13.35 an d n.29 per cent of the farm debt 
for these expenses. By contrast, in the North Atlantic division 4.00 
per cent of these families incurred 1 .59 per cent of this debt. The 
average for the United States is 5 .89 per cent of families and 2 .83 
per cent of incumbrance. 

The table on p. 719 sets forth these facts concerning the objects 
of incumbrance, classified by states. 

233. FARM INDEBTEDNESS IN THE UNITED STATES 1 
By JESSE E. POPE 

It may be broadly stated that previous to the last quarter of the 
nineteenth century American farmers felt little need of credit. They 
had been given their land by the government or had bought it at 
comparatively low prices. Since agriculture was extensive, expendi- 
tures for improvement and equipment were inconsiderable. The 
virgin soil needed no fertilization, and credit was seldom required 
except for family supplies during the crop growing period. 

The western movement, which began to assume large proportions 
about the middle of the nineteenth century, resulted in the opening 
of vast areas of fertile land adapted to grain growing and of free graz- 
ing land on which livestock could be raised at low cost. This resulted 
in a tremendous surplus of agricultural products, which, owing to the 
development of railroad and ocean transportation, was thrown on the 
markets of the world, bringing prosperity to the farmers of America 
and ruin to those of Europe. 

Partly as a result of this overwhelming flood of production and 
partly on account of the speculation and inflation which followed the 
Civil War, a great increase in land values took place. This gave 
farmers a broader basis for borrowing and they took advantage of it 
to make improvements and to add more land to their farms. Tempted 
by the high rates of interest and deceived by the reported endless 

1 Adapted from the Quarterly Journal of Economics > XXVIII (August, 19 14), 
702-26. 



RURAL CREDITS 721 

wealth of the new West, eastern and European capitalists made loans 
altogether too freely and often on the security of land practically 
worthless or located in regions of uncertain crops. The upward 
movement culminated in the early '90's; grain farming reached its 
climax and over-production brought the inevitable fall of prices and 
of land values. 

Farmers now began to feel the burden of their great mortgage 
indebtedness, which had grown enormously during the preceding 
decade and which had been incurred largely for unproductive pur- 
poses. Many could not pay their interest, and as it often happened 
that the selling price was less than the amount of the mortgage, fore- 
closures were common. This collapse caused widespread discontent 
among the farmers and a total mortgage indebtedness of farms oper- 
ated by their owners estimated at $1,085,995,960, in 1890. 

The census of 1900 did not secure data on farm indebtedness, but 
the census of 19 10 secured information regarding the amount of 
mortgage indebtedness on farms operated by their owners. The 
result was a total debt of $2,293,000,000 — no per cent greater than 
the debt of similar farms in 1890. When land values increase, owner- 
ship becomes more difficult, and the increase of mortgage indebtedness 
is inevitable. During the period 1890-1910 the value of land and its 
improvements for the country as a whole increased 100 per cent, and 
this, coupled with frequency of land transfers, resulted in a great 
increase of mortgage indebtedness. 

The farmer has also made heavy expenditures to raise his standard 
of living and has spent large sums on improvements and equipment 
and in working capital. The value of buildings shows an increase 
of 77 .8 per cent from 1900 to 1910. During the same decade value 
of implements and machinery increased 68 . 7 per cent, while the 
expenditure for labor increased 82 .3 per cent, and that for fertilizer, 
115 per cent: These increased expenditures for equipment and opera- 
tion are the result of the normal development of agriculture, since 
they arise out of a growing necessity for greater intensity of culti- 
vation. Animals are of better quality and require better housing. 
More thorough cultivation calls for a larger expenditure for labor or 
increased employment of machinery. Declining soil fertility may 
force the farmer to resort to artificial fertilizer. It is possible that 
these added items of expense may not be reflected in increased produc- 
tion and must, therefore, be wholly met out of an increase in prices. 
But should such an increase in prices not take place, the additional 



722 AGRICULTURAL ECONOMICS 

expenditures would have to be met out of the farmer's capital, which 
must ultimately increase his mortgage indebtedness. 

The writer is not of the opinion that the average mortgage 
indebtedness of the American farmer is excessive. In a country so 
rich agriculturally, a mortgage debt of $2,793,000,000 is no cause for 
alarm; and in general, an increase of the agricultural indebtedness 
of a country is usually a sign of prosperity. But it is a sign of pros- 
perity only if the increase of land values on which the additional 
mortgage debt is based has been caused, not by speculation or by an 
abnormal rise in the prices of products, but by an actual increase in 
the volume of production. It is essential not only to the welfare of 
society in general but also to the security of the farmer himself that 
any increase in the returns from agriculture shall have resulted mainly 
from an increase of production rather than from high prices. 

As to personal indebtedness, there has been no general investiga- 
tion into the situation of the American farmer. Holmes estimates 
it as follows: chattel mortgages, $700,000,000; liens on crops other 
than cotton, $450,000,000; cotton crop liens, $390,000,000; unsecured 
debts, to local merchants, $250,000,000, and other unsecured debts, 
$410,000,000. With regard to its source personal credit may be 
classified as: (a) merchant's credit, including store credit, dealer's 
credit and factor's credit; (b) bank credit. 

The practice among storekeepers of selling to farmers goods to 
be paid for after the harvest is almost as universal as agriculture 
itself. It is less prevalent in regions of diversified farming, where the 
farmer, from the sale of eggs, poultry, milk, etc., has a weekly income 
available for ordinary household expenses. There exists, however, in 
the South, a far more important form of store credit. The local 
merchant not only gives credit for the ordinary family supplies, but 
in reality finances the growing crop — contracting to make a definite 
loan to be taken in commodities. A bank, however, often lends the 
merchant the money for buying the supplies to be advanced to the 
farmer. As an inevitable result of the expense and risk of granting 
this form of store credit, its cost is high, and the system undoubtedly 
lends itself to grave abuses. With the development of economic 
sense, it is declining; but without such credit independent farming 
would have been impossible for a large part of the southern farmers. 

The substitution of expensive machinery for labor is a marked 
characteristic of American agriculture, and a large part of this machin- 
ery is supplied on credit by the manufacturer, who takes the dealer's 



RURAL CREDITS 723 

or the farmer's notes and in case of need discounts them, sometimes 
at the farmer's own bank but more often at some metropolitan bank. 

In factor's credit the loan is made, not in supplies but in cash, 
though the purpose for which it is to be used is rigidly prescribed. 
In the South the cotton factor advances the farmer the money for 
financing his crop, and the farmer contracts to plant a certain number 
of acres of a certain crop, cotton for example, and to sell his crop to 
the factor. In the North a livestock commission firm advances 
money to the farmer for the purchase of livestock, which he con- 
tracts to sell through the firm. 

The extent to which bank credit is used by American farmers 
varies widely according to the economic development of the com- 
munity. Where agricultural methods are well established and 
climatic conditions are such as to preclude the probability of crop 
failure the farmer enjoys practically the same credit advantages as 
the merchant. Farms are comparatively large and therefore the 
loans are of sufficient size to make it worth while for the banks to 
grant the accommodation, and our system of free banking has 
permitted the establishment of banks wherever they could be made 
to pay. 

B. Farm Credit Institutions of the United States 

234. MORTGAGE BROKER AND MORTGAGE COMPANY 1 
By JAMES WILLIS GLEED 

The western mortgage business was begun by individual brokers, 
who invested on their own judgment, based on personal knowledge 
of borrowers and securities. Their profit lay in the margin between 
the low interest capitalists would accept and the high interest bor- 
rowers would pay. Capitalists sent their money for investment, and 
mortgages were made to them directly, so that the brokers required 
no capital. The business of bringing borrower and lender together 
has always been profitable. The broker of the community becomes 
the capitalist of the community. The western mortgage brokers have 
been no exception to the rule. One of them in Kansas has made nearly 
$10,000,000 since 1870. The business developed rapidly. As increased 
capital has become necessary, individual brokers have given way to 
corporations. There are probably two hundred such corporations 

1 Adapted from the Forum, IX (March, 1890), 94-105. 



724 AGRICULTURAL ECONOMICS 

now operating in Nebraska and Kansas alone. While the individual 
broker confined his operations to his own and adjoining counties 
the corporation took states for its field, established local agents, and 
adopted the plan of taking all mortgages in the company's name. 
Then the process of securing a loan would be about this : the borrower 
applies to the local agent, who requires him to fill out and sign and 
swear to the truthfulness of an " application," in which he sets forth 
the exact description of the property offered as security; how much 
of the land is under cultivation; when he bought the land and how 
much he paid for it; what improvements are upon it — fences, houses, 
barns, cribs, etc.; the cash value of the improvements; the present 
cash value of the land; the crops of the previous year and the current 
year; the rental value; the location of the land with reference to 
railroads, towns, schools, churches; the assessed valuation; the tax 
thereon; the cattle on the premises; the purpose for which the money 
is borrowed; the total valuation of the borrower's property, real and 
personal; the state of the title. In a word, he is made to give all 
the information which can be of any conceivable use in determining 
the value of the real and personal security offered. Then the local 
agent and two or more disinterested residents indorse on the applica- 
tion a sworn appraisement of the land. The application is sent to 
the company, and an agent from the home office is sent out to inspect 
and report. If his report is favorable, a bargain is struck as to the 
rate of interest, which is usually the lowest rate that will float the 
security in the East at par; and as to the amount of the commission, 
which is the company's profit. As to the payment of the commission, 
various plans are in use. The most profitable method is this: out of 
the proceeds of the note and mortgage the negotiator receives all the 
expense of making the loan, and his commission. For many years 
this commission was enormous. The companies located at St. Paul, 
Omaha, Des Moines, Kansas City, St. Joseph, Topeka, Denver, or 
Dallas, sometimes received as high as a 15 per cent commission on a 
five-year loan, and for many years the home company never received 
less than 10 per cent. The local agent exacted all that he could above 
this amount. Another custom as to commission is to secure it by 
notes and a second mortgage. This commission is usually made pay- 
able in ten semi-annual instalments. On default in the payment of 
one instalment, the whole sum becomes due. 

Embodied in the note or mortgage are all conceivable provisions 
for the protection of the lender. Interest is made payable semi- 



RURAL CREDITS 725 

annually, and is represented by interest coupons that bear interest 
from maturity at the highest legal rate. The borrower assures the 
payment of the taxes, and agrees to keep the buildings insured for the 
benefit of the mortgagee. On default in the payment of interest or 
in the performance of any of the agreements of the note or mortgage, 
the lender may declare the whole amount of principal and interest 
immediately due. Such being the contract, other sources of profit 
besides the initial commission will immediately be perceived. The 
transaction may have such a history as this : the first interest coupon 
is paid; the second is defaulted. The company remits to the eastern 
investor, and then declares the whole debt due on account of the 
default. The borrower wishes to pay up and have the loan reinstated. 
The company then collects the amount of the defaulted interest, with 
interest compounded thereon at the highest legal rate and a further 
commission, or bonus for reinstating or renewing the loan. Or per- 
haps the company insists upon payment of principal and interest. In 
that case, the borrower borrows elsewhere; the company is paid in 
full; the amount is reinvested, earning another 10 per cent commis- 
sion; and the new mortgage is sent to the investor and the old one 
canceled. The borrower who for any reason desires to pay off his 
mortgage before it is due, must do so on such terms as the company 
may prescribe. He cannot treat directly with the eastern owner of 
the mortgage, for he cannot ascertain who that owner is ; the assign- 
ment from the company to the investor is not recorded. The bor- 
rower is usually allowed to anticipate his obligation on payment of a 
bonus of 2 per cent per annum for the unexpired time. 

Of course it is not always to the interest of the company to take 
advantage of a default. The security may be so large as to cover 
principal and interest for the entire term of the mortgage. In such 
case, should taxes be unpaid, the company will either redeem in 
behalf of the owner, or buy at the tax sale for itself. In the former 
case, the amounts paid for taxes under the terms of the mortgage will 
bear the highest legal rate of interest. In the latter case, such 
amounts will, under some statutes, bear interest at the rate of 24 per 
cent. 

If a foreclosure becomes necessary, the company secures it at the 
lowest possible cost — at a wholesale cost. In case of foreclosure, if it 
has not guaranteed the loan, the company is in this position: it can 
repay the debt and interest to the eastern investor, who is always 
ready to receive it, and itself take the land; or it can leave the land 



726 AGRICULTURAL ECONOMICS 



* 



in the hands of the investor. This option, in case of non-guaranteed 
loans, has been made a source of considerable profit to some com- 
panies. Many companies, however, adopt the invariable rule of 
taking the land. The best and most conservative companies have 
made large profits by the sale of lands, by themselves taking title to 
all foreclosed tracts. 

Various means have been adopted for negotiating these securities 
in the East. As stated above, the mortgage is sometimes made 
directly to the investor; sometimes to the company, and then assigned. 
In the latter case, it is sometimes assigned without guaranty, some- 
times with a partial guaranty, and sometimes with a full guaranty. 
Of late, what is called the debenture system has been much in vogue. 
The company issues its own promises to pay, and secures them by 
assigning to a trustee bonds and mortgages whose par value somewhat 
exceeds the face value of its promises. 

The eastern investor in western mortgages runs some risks. 
Speculative values will often be given to farm land at first in a new 
country, before experience has determined its real interest-earning 
value. This has been shown in many counties in eastern Kansas and 
Nebraska, where values are now lower than when settlement was first 
being made. 

Again, the mortgage-loan company itself is constantly in danger 
of being imposed upon. Many local agents work on commission. 
Their earnings depend on their making loans, and the size of the com- 
mission depends upon the size of the loan. Local agents and exami- 
ners from the home office are sometimes bribed to overvalue the land. 
The sworn appraisement by householders resident in the county where 
the land lies by no means secures in every case what it is meant to 
secure. The dishonest borrower always knows who in the community 
entertains the wildest notions about the future of his county or town, 
and this man makes the sworn appraisement; and there is a wide 
difference between the appraisal made by really honest men "for loan 
purposes," and the appraisal made by the same men in their actual 
buying and selling. Bad loans made and foreclosed injure good secu- 
rities by throwing upon the market properties to be sold below their 
real productive value. 

The risk of the investor from failure of title is small. The titles 
are simple. With few exceptions, they may be traced directly from 
the federal government. Every investment company employs an 
attorney to examine titles to the properties that are to be pledged, 



RURAL CREDITS 727 

and the western states generally have by statute simplified convey- 
ancing as much as possible. Descriptions are simple and definite. 
An exceedingly large proportion of these mortgage investments, as 
compared with investments of like magnitude in other lines, is entirely 
safe. 

Certain eastern investors have already adopted the plan of hiring 
trustworthy salaried agents, to make and to take care of their loans. 
This plan is not practicable for the ordinary investor, who must 
depend largely on some trusted middleman. It is first in order, 
therefore, to select an honest and capable broker. Here and there 
may be found a private broker who has clear notions of duty toward 
his correspondents; who makes investments for others on his own 
judgment, based on personal knowledge; who is content with a fair 
profit himself; and who can truthfully say that he has never lost a 
penny of his clients' money. When such a man can be found, he 
is a treasure. His honor is of a higher sort than the honor of most 
corporations; and, doing a business which is strictly under his own 
personal supervision, he is less likely to be imposed upon by dishonest 
borrowers. In judging of a loan company, a number of points should 
be kept in mind. What is its history, and how long has it been in 
existence ? Are its methods of placing money the best ? Does it do 
business in a safe territory ? What is the standing of its officers and 
stockholders ? Where do its officers and stockholders reside ? Does 
it offer high rates ? Does it give good reasons for offering high rates ? 
Does it guarantee its loans ? If so, is it because the loans are good, 
or because the guaranty is worthless? How is it regarded by the 
people among whom it makes its loans ? 

Let it be remembered that, because the business has proven very 
profitable, many wild-cat companies have been formed within the 
past four or five years. Such companies, managed by irresponsible 
and inexperienced men, have invested much money. They are ready 
with their guaranties and they offer high rates, but there is no sound- 
ness in them. Tempted by high commissions, they have loaned 
largely in excess of the security, so that the settler who desired to go 
farther west, or to return to the East, could realize more money upon 
mortgage than upon sale. The wild-cat company runs a brief but 
pernicious course. It demoralizes borrowers, plunders investors, and 
seriously prejudices legitimate mortgage business. 

The chief objection to what is called the debenture system is that 
companies are likely to secure their debentures by a poorer class of 



728 AGRICULTURAL ECONOMICS 

mortgages. The trustee never vouches for the character of the 
securities upon which debenture bonds are based. He only certifies 
the face value. Bad securities taken for large commissions are likely 
therefore to be put into the hands of the debenture trustee. There 
is nobody to inspect or to criticize. Another objection is that the 
investor under the debenture system is without speedy remedy. He 
is part of a series. He cannot move independently. The advantages 
of the debenture system are that the investor is not compelled to 
stand or fall with one mortgage or one piece of real estate. Each 
debenture bond is, in a sense, insured by all the rest of the series. 
The debenture, too, is an absolute guaranty by the mortgage company. 
The western mortgage business is the outgrowth of unprecedented 
economic conditions. Within a brief period, an unusual amount of 
capital has been devoted — not directly but indirectly, by way of 
mortgage loans — to the development of a vast area of agricultural 
country. The amount of capital advanced has been great, but not 
out of proportion to the results achieved. The purpose was legiti- 
mate, and not of the nature of a South Sea Bubble. Great advantages 
have resulted to the settlers, the brokers, and thus far to the capital- 
ists. Losses to capitalists have been small, compared with losses in 
other lines of investment. Present conditions and future prospects 
seem to justify caution, but not alarm. 

235. SOME MORTGAGE COMPANY OFFERINGS 1 
J. A. B. Coupon Notes $5,000.00 

A series of Ten (10) coupon notes, in denominations of $500.00 each, 
dated January 19th, 1916, maturing January 19th, 192 1; bearing interest 
at the rate of 6|% per annum, interest payable semi-annually to the 
Trust Comapny, , Texas; all equally secured by first mort- 
gage to the Trust Company on 241 acres of land in W. County, 

Texas, about eight miles southeast of W. 

The land is all under good fence, wire and post. About 50% of it 
is good, black, waxy soil; the balance is black sandy loam — all good, 
rich soil. About 150 acres are in cultivation, probably 60 acres being put 
in for the first time this year. Of this cultivated land, about 75 acres were 
originally black waxy prairie, now in good state of cultivation; about 
75 acres were originally bottom timber land, probably 30 acres put in cul- 
tivation in 191 5, the balance being put in this year. The tract is practically 
level; has one small drain or slough running through it, which adds materi- 
ally to the drainage. 

1 From the current advertisements of two prominent companies. 



RURAL CREDITS 729 

The improvements consist of three, three-room box tenant houses and 
one, two-room box house, recently completed. 

Mr. B. states that it is his intention to put the entire tract in cultiva- 
tion except probably 25 acres, which he will use for pasturage and wood 
for tenants. 

The place is watered by wells. The tract lies in Caney Valley, but is 
not subject to overflow. 

Improved lands in this vicinity sell at $60 . 00 to $100 . 00 per acre. Our 
appraiser considers this tract worth $45 . 00 per acre, or a total of $10,845 . 00. 

We offer these notes at par and accrued interest, accompanied by our 
written guarantee. 

& CO., BANKERS 

Founded A.D. 1858 

FARM MORTGAGE INVESTMENTS 

The Farm Mortgages described herein represent conservative Loans on 
improved farm lands in the best agricultural districts of the United States. 
They are just plain old fashioned Farm Mortgages covering producing 
farms that are able to earn more than the overhead for interest and taxes 
besides making a living for the borrower and leaving a surplus to apply 
on the debt. 

We allow investors ample time to investigate the security and examine 
the papers in a Loan if they desire to do so. There is no difficulty in quickly 
ascertaining information regarding the security and the borrower. The 
country is well supplied with Banks wherever choice lands are found, and 
the bankers will always gladly respond to inquiries as to conditions, values 
and all matters of interest to investors. In case a Mortgage is found to be 
not as represented we will repurchase it or substitute another. 

We will collect and remit principal and interest without any expense 
to investors, and generally look after a Mortgage during its existence as if 
it were our own property. 

This House was founded in 1858, and has passed through all the financial 
panics and business depressions of the last half century. We have consist- 
ently and conservatively adhered to one kind of investment — Farm Mort- 
gages. During this period we have loaned many millions of dollars for 
other people, and up to this time no purchaser has ever lost a dollar on a 
Mortgage purchased of this House. Our service is an assurance to inves- 
tors that all essential details of the title and security have been carefully 
scrutinized before a Loan is made. Our dealings with clients are private 
and are held in strict confidence. 

We offer these Loans, subject to previous sale, but have others on hand 
of similar character and can substitute in case of prior sale. 

Complete information regarding the security and terms will be fur- 
nished upon request. 



730 AGRICULTURAL ECONOMICS 

FIRST MORTGAGE FARM LAND BONDS 

In order to supply the demand for small investments we have provided 
Coupon Mortgage Bonds in denominations of $500 and $1,000. These 
Bonds are all equally secured by first Mortgages on productive lands in 
Illinois and Iowa without any preference or priority of lien of one Bond 
over another. The security is of the same character as described in the 
within list. 

Orders by telegram may be made at our expense. Reservations may 
be made for future delivery if desired. Please order by number. 

ILLINOIS AND IOWA FARM MORTGAGES 

No. 2637 — $10,000, 5%, due March 1st, 1921. This Mortgage covers 
the borrower's home farm of 160 acres in Iroquois County, Illinois, valued 
at $36,000. It is improved with good buildings, and the soil is a black 
sandy loam, all tillable, and will produce good crops of grain. We have 
known the borrower a long time and have always found him prompt and 
satisfactory in all his dealings with us. This Mortgage was originally 
for a larger sum, and he has gradually reduced it to the amount of this 
Loan. 

No. 2620 — $15,000, 5%, due April 1st, 1921. This Mortgage covers 
the home farm of the borrower consisting of 360 acres in Mitchell County, 
Iowa, located two miles from a good market town, and valued at $70,000. 
It is well improved with new and substantial buildings. Similar land in 
this neighborhood rents from $6.00 to $8.00 per acre. The borrower is 
considered a good moral risk. 

No. 2626 — $6,500, 5%, due January 1st, 1921. This Mortgage covers 
127 acres of land in Linn County, Iowa, located one mile from the nearest 
town, and valued at $28,000. This is the borrower's home place and we 
understand he has refused this amount for his farm. Similar land in the 
neighborhood rents from $6.00 to $8.00 cash per acre. The borrower is 
an old resident of this community, and comes to us well recommended by 
his banker. 

No. 2621 — $6,000, 5%, due January 1st, 192 1. This Mortgage covers 
a splendid quarter section of land in Mahaska County, Iowa, valued at 
$32,000. The buildings are fair. The borrower owns 1100 acres of land 
in this neighborhood all worth at least $200 an acre and clear of indebted- 
ness. He is an old citizen of this County, and bears an excellent reputation. 

NORTHWESTERN FARM MORTGAGES 

The following described Mortgages cover going farms in the best farm- 
ing districts of Idaho and Oregon. These farms will more than earn the 
overhead for interest and taxes, besides making a good living for the bor- 
rower and leaving a surplus to apply on the debt. 



RURAL CREDITS 731 

No. 607 — $2,000, 6%, due May 1st, 1920. This Mortgage covers a 
farm of 69 acres in Fremont County, Idaho, valued at $5,630. There are 
67 acres tillable and 60 acres under cultivation. The soil is rich and the 
neighborhood is excellent. The borrower owns 80 acres adjoining this land, 
which is farmed in connection with this place. The farm is well stocked 
and the improvements are adequate. 

No. 1790 — $2,500, 6%, due November 1st, 1920. This Mortgage covers 
a farm of 640 acres in Bonneville County, Idaho, valued at $8,700. 100 
acres are in fall grain, 40 acres in barley, 30 acres in stubble, 330 acres in 
tillable pasture and the remainder in rough pasture. The improvements 
consist of a small house, barn and granary. The borrower bears a good 
reputation. 

No. 526 — $900, 6%, due March 1st, 1920. This Mortgage covers 40 
acres of land in Canyon County, Idaho, located 2\ miles from the nearest 
market town, valued at $2,600. There is a small house and barn on this 
place valued with the land. This farm produced a crop valued at $1,000 
in 1 9 14. The mortgagor owns 330 acres of land adjoining this farm, and 
comes to us well recommended. 

No. 564 — $1,200, 6%, due April 1st, 1920. This Mortgage covers 240 
acres of land in Power County, Idaho, located 2\ miles from the nearest 
market town, and valued at $4,925. There are 200 acres tillable and 13^ 
acres under cultivation. The soil is excellent and raises heavy crops. This, 
money was borrowed for improvements, and will be used to put up a new 
house and barn. The borrower is a good farmer, and is improving his 
place rapidly. 

No. 602 — $1,500, 6%, due May 1st, 1920. This Mortgage covers a 
farm of 150 acres in Boise County, Idaho, located if miles from the nearest 
market town, and valued at $4,350. This farm is all tillable ar> I 125 acres 
are under cultivation. The soil is a dark sandy loam and very productive. 
The borrower bears a good reputation for thrift and industry, and will use 
part of the money borrowed for improvements. 

236. INVESTMENTS OF LIFE INSURANCE COMPANIES IN 
FARM MORTGAGES 1 

By ROBERT LYNN COX 

On December 31, 1914, American life insurance companies held 
over $1,700,000,000 in real estate mortgages, and their ratio to other 
assets has been steadily increasing in the last ten years. Statistics 
covering 98^ per cent of all the outstanding mortgages of American 

1 Adapted from a report submitted December 9, 1915, at the Ninth Annual 
Meeting of the Association of Life Insurance Presidents and printed in the Pro- 
ceedings, Vol. IX. 



732 AGRICULTURAL ECONOMICS 

companies show that 39.03 per cent of the total amount was on 
United States farms, 59.24 per cent on other real property in the 
United States, and 1 .73 per cent on real estate elsewhere. 

The proportion of mortgage loans on farms varies all the way from 
thirteen-hundredths of 1 per cent in the Middle Atlantic group of 
states to 86 per cent in the Northwestern group, the average for 148 
companies in America being 39.72 per cent of their total United 
States mortgage loans. In general it will be noted that in the Eastern 
states the amount loaned on farms is negligible, that in the Central, 
Northern, and Southern groups the farm loans rise to considerable 
amounts, but it is in the great Southwestern and Northwestern sec- 
ti9ns, whose agricultural development in the last fifty years has been 
so marvelous, that the great bulk of the life insurance farm loans 
have been placed. On the other hand we find that over half of the 
loans on real property, other than farms, have been placed in the 
populous commercial and manufacturing sections of the New England 
and Middle Atlantic states, which contain very nearly half of such 
property values of the entire country. 

The relation of farm loans made by life insurance companies to 
total farm loans as given by the United States Census of 19 10 (the 
latest available estimate) is shown in Table a B." 

It should be said in explanation of the amount of farm loans given 
by the Census of 19 10, that the enumerators included the data only 
of mortgaged farms occupied by the owner, so that mortgages upon 
rented farms were left out. 

It contains also a column showing the savings bank deposits in 
each state for reference later. 

A very interesting fact is brought out by this table, viz., that 
while the amount of farm mortgages reported by the Census in the 
New England and Middle Atlantic states is more than twice as great 
as the amount in the South Atlantic and Gulf and Mississippi Valley 
combined, the life insurance companies have loaned less than 
$1,000,000 in the New England and Middle Atlantic states, while 
they have loaned over $40,000,000 in the South Atlantic and the Gulf 
and Mississippi Valley. The obvious explanation is furnished by the 
column showing savings bank deposits. The local accumulations of 
savings bank and private capital have taken care of the demand for 
farm loans in the older and more populous sections of the country, 
leaving the fife insurance funds contributed in large part by these 
sections free to flow under economic law into the newer sections where 



RURAL CREDITS 



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734 AGRICULTURAL ECONOMICS 

the local supply of capital is inadequate to meet the needs of 
rapidly developing communities. How great this assistance of life 
insurance companies has been to these sections is shown by the 
fact that their outstanding loans December 31, 1914, amounted to 
64 J per cent of the farm loans reported by the Census of 19 10 in 
the Northwest, 59 per cent in the Southwest, 37 per cent in the 
South Atlantic, and 30 per cent in the Gulf and Mississippi Valley 
states. 

We have already said that about 40 per cent of the mortgages 
held by life insurance companies were on farms, while 60 per 
cent covered other real property. This might suggest the thought 
that life insurance funds had been invested disproportionately as 
between these two classes of securities. However, the average per 
cent of values loaned on farms for the whole country is 1 .859 per cent, 
while on the other hand the companies have loaned but 1.259 P er 
cent of the values of other real property. While companies have 
loaned to the amount of 3! per cent of the estimated farm values in 
the great agricultural section, they have loaned less than 2 per cent 
in the manufacturing and commercial sections on other real property 
values. Furthermore, while life insurance companies have made 
nearly 40 per cent of their mortgage loans on farms, only a little over 
30 per cent of the total realty values of the country are in farms, so 
that favoritism, if any, has been shown in behalf of farm loans as com- 
pared with loans on other kinds of real property. 

A careful examination of Table a F" will show a close and appar- 
ently a very direct connection between high average farm values and 
low interest rates. It appears that there are thirty-one states in 
which farm land values average $20 .00 or over per acre. In eighteen 
of these the average interest rate on farm loans is 6 per cent or less. 
There are seventeen states in which farm values average less than 
twenty dollars per acre. In eleven of these states the average interest 
rate on farm loan is over 6 per cent. 

Other things being equal, the states in which up-to-date enter- 
prising farming leads to good buildings, well-stocked farms, good 
crops (farming with profit), are those which attract capital and 
secure low interest rates. If " other things" are not equal, if there 
are antiquated laws as to titles, transfers, and foreclosures, or 
statutes intended to circumvent the operation of economic law, the 
flow of capital may easily be turned aside and interest rates thereby 
increased. 



RURAL CREDITS 
TABLE "F" 



735 



Farm Mortgage Loans of Life Insurance Companies, December 31, 1914 

Amount of Mortgage Loans on Farm Property Held December 31, 1914, by 126 American Life Insur- 
ance Companies, Whose Total Mortgage Loans Amounted to 97 Per Cent of All Mortgage Loans 
Held by American Companies, with the Average Rate of Interest Received in Each State, 
Arranged by States in the Order of Amount Loaned 



States, in Order of Amount 
Loaned 



Farm Loans by Insurance 

Companies 

December 31, 1914 



Amount 



Average 

Interest 

Rate 



Estimated Farm Values, 
United States Census, 1910 



Land 
Average 
per Acre 



All Farm Property 



Iowa 

Nebraska 

Kansas 

Missouri 

Illinois 

Indiana 

Minnesota 

Texas 

Oklahoma 

South Dakota. .. 
North Dakota . . 

Ohio 

Georgia 

Tennessee 

California 

Kentucky 

Arkansas 

South Carolina. . 

Colorado 

Montana 

Idaho 

Mississippi 

Washington 

Wisconsin 

North Carolina.. 

Louisiana 

New Mexico 

Michigan 

Utah 

Oregon 

Alabama 

Virginia 

Maryland 

Arizona 

Pennsylvania. . . 

Wyoming 

Connecticut .... 

Florida 

Delaware 

West Virginia. . . 

New Jersey 

Vermont 

Nevada 

New York 

Massachusetts. . 

Maine 

New Hampshire . 
Rhode Island . . . 



$139,511,101 

62,390,393 

60,395,448 

58,406,800 

49,941,759 

47,014,148 

33,981,293 

32,242,856 

28,056,308 

26,950,777 

18,142,658 

16,588,937 

14,828,323 

9,386,015 

8,736,255 

6,282,692 

3,851,605 

3,377,477 

2,945,3i6 

2,900,458 

2,754,254 

2,719,824 

2,391,781 

2,003,744 

1,475,010 

1,3.79,502 

1,306,042 

1,252,126 

1,192,602 

1,107,912 

1,102,313 

645,450 

423,000 

407,602 

331,156 

241,933 

75,050 

66,004 

45,ioo 

40,907 

16,965 

13,775 

11,500 

10,950 

10,100 

5,950 



532 
5-34 
5-46 
535 
5.i6 
5-3i 
5-36 
6-99 



30 

28 

56 

42 

5.4i 

6.99 

6.47 

6.92 

7-29 

8-53 

6.99 

6.97 

5-53 

5-79 

7.64 

7-55 

5-41 

8.74 

6.66 

7-34 

6.00 

5.84 

7.20 

75 

7i 

20 

00 

97 

70 

00 

26 

8.00 

5.56 

5.19 

5.8o 



$82.58 
41.80 
35-45 
41.80 
95.02 
62.36 
36.82 
14 -53 
22.49 
34 69 
25.69 
53-34 
13-74 
18.53 
47.i6 
21.83 
1413 
19.89 
26.81 
16.74 
41.63 
13.69 
44.18 
43 -30 
1529 
17.99 
8.77 
32.48 
29.28 
35-23 
10.46 
20.24 
32.32 
3397 
3392 
10.41 
33.03 
17.84 
33 63 
20.65 
48.23 
12.52 
12.99 
32.13 
36.69 
13-73 
I3-7Q 
33-86 



$ 3,257 

1,813 

1,737 

1,716 

3,522 

1,594 

1,262 

1,843 

738 

1,005 

822 

1,654 

479 

480 

1,450 

635 

309 

332 

408 

251 

245 

334 

571 

1,201 

456 

237 

in 

901 

117 

455 

288 

532 

241 

47 

1,041 

97, 

138, 

11S, 

53, 

264, 

217, 

112. 

39 

1,184 

194 

159 

85 

-: 



,379,400 
,346,935 
,556,172 
204,386 
792,570 
275,596 
,441,426 
,208,395 
,677,224 
,080,807 
,656,744 
152,406 
,204,332 
,522,587 
,601,488 
459,372 
,166,813 
,888,081 
,518,861 
,625,930 
,065,825 
,162,289 
,968,457 
,632,723 
,624,607 
,544,450 
,830,999 
,138,299 
,545,332 
,576,309 
,253,591 
,058,062 
,737,123 
,285,310 
,068,755 
915,277 
319,221 
145.9S9 

I55.9S3 
390.954 
134.519 
5^S.:- 5 
609,339 
745,829 
io$.;c>5 

010.020 

910,001 
032.800 



Total 

Averages . 



$646,961,371 



$32-40 



$34,Soi, 1 25,697 



The striking fact brought out by table "G" is that while the 
average rate of interest on farm loans in each group of states is higher 
than the average rate of interest on loans secured by other real 



736 



AGRICULTURAL ECONOMICS 



property, in the great Central Northern and Northwestern sections, 
where the farm values are highest, the difference between these two 
classes of loans is smallest. Indeed, we found, on examining the 
figures of individual companies loaning on all kinds of real property, 
that a large number had secured in these sections a higher average 
interest rate on their city and village loans than on their farm loans. 

TABLE "G" 



Loaned on 

Farms by Life 

Companies, 1914 



Average 

Interest 

Rate on 

Farm 

Loans 



Amount Loaned 

on Real Property 

Other Than 

Farms by Life 

Companies, 1914 



Average 
Interest 
Rate on 
Other Real 
Property 



Combined 

Average 

Both 



New England 

Middle Atlantic 

Central Northern 

South Atlantic 

Gulf and Mississippi Valley 

Southwestern 

Northwestern 

Pacific 

Totals 

Averages 



$ 104,875 

827,171 

116,800,717 

20,433,173 

20,870,348 

187,204,378 

284,118,815 

16,601, 908 



$ 18,387,384.79 
598,336,948.65 
n8,533,747.23 
43,982,393 -37 
26,543,483.69 
58,966,102.81 
46,094,188.83 
67,603,321.44 



68 


4 


03 


5- 


00 


5- 


58 


5 


49 


5 


23 


5- 


29 


5- 


•24 


5 



$647,083,487.58 



$978,447,570.81 



5.5s 



5-13 



While we have not been able to prepare complete statistics on the 
subject, an examination of the total mortgage loans of nine com- 
panies, seven of which loan chiefly or wholly on farm property, com- 
pared with nine other companies, seven of which loan wholly or 
chiefly on city property, shows that the average size of farm loans is 
about $2,500, while the average size of city loans is about $75,000. 
When it is considered that the work incident to inspecting the prop- 
erty, examining titles, preparing the papers, collecting interest, seeing 
that taxes are paid, etc., is much the same for each loan, regardless 
of its size, we find a very obvious economic explanation of why farm 
loans, generally speaking, are required to pay a somewhat higher rate 
of interest than loans upon other kinds of real property. 

It appears that life insurance companies, collectively, are very 
much the largest owners of farm mortgages in this country, their 
holdings exceeding by about 20 per cent the total farm loans held by 
the 26,765 banks of this country. As to the farm loans reported by 
the United States Census in 1910, it would appear that the life 
insurance companies hold about 37 J per cent., the banks about 31J 
per cent, private investors, colleges and other institutions combined 
about 31 per cent. As we have already noted, life insurance com- 
panies have placed nearly 40 per cent of their mortgage loans on farm 



RURAL CREDITS 737 

property while the value of farm property is only a little over 30 per 
cent of the value of all real property of the country. Any preference 
they have shown for farm loans, however, is more than offset by the 
preference the banks have shown for city loans, about 84 per cent of 
their mortgages being on city and village property, which comprises 
less than 70 per cent of the total real estate values of the country. 



237. DRAINAGE BONDS AS A FORM OF AGRICULTURAL , 

CREDIT 1 

By TOM K. SMITH 

For years and years different sections of this country have been 
borrowing money and issuing bonds for the purpose of reclaiming and 
protecting wet and overflowed lands. In Missouri we have been con- 
sistently marketing such bonds for fifteen years; the issues aggregate 
millions of dollars and are not only favorably received by our clients 
but are purchased without hesitation. The record of payment is so 
satisfactory that investment bankers in our state do not consider their 
lists complete unless they contain one or more such offerings. The 
same condition exists in almost every other state in the Mississippi 
Valley and in many other communities where splendid local markets 
for drainage bonds have been developed and where the buying com- 
petition is decidedly keen. 

Very little effort has been necessary to sell the supply of drainage 
bonds in the local markets, and dealers have not been inclined to do 
the exploiting necessary to create a general market for their securities. 
As a rule, the single issues have not been large and have been so 
favorably received that nearly every one has- been exhausted before 
outside investors could familiarize themselves with the offerings. 
Fifty thousand dollar and $100,000 issues have been the rule; $200,000 
issues were considered large and an issue of $1,000,000 was exceptional. 

With the proceeds of these bonds wonderful results have been 
achieved; some of the most fertile and productive agricultural com- 
munities depend entirely upon artificial drainage constructed with 
the proceeds of bond issues. Encouraged by these successes, more 
extensive improvements have been undertaken and larger bond issues 
authorized; so large, in fact, that a broader market has boon necessary. 

Adapted from a paper delivered at the Fourth Annual Convention of the 
Investment Bankers Association of America, Denver, September. 1015. and 
printed in the Proceedings of that convention, pp. 120-30. 



738 AGRICULTURAL ECONOMICS 

We have been forced to exploit drainage bonds and to offer them in 
the general market. Until this year, local capital has been sufficient 
to finance all Missouri drainage bond issues, but the supply has 
increased to such an extent that we have been compelled to interest 
outside dealers and investors. Since January i approximately 
$10,000,000 of drainage bonds have been issued in the state of Missouri 
alone, and, when you take into consideration that our market is 
expected to furnish funds with which to finance improvements in 
several of the southwestern states, you can realize why it has been 
necessary for us to interest outside capital. In spite of the misgivings 
with which the first offerings were received, the result has been 
entirely satisfactory and today leading investment bankers are selling 
drainage bonds in large quantities and crying for more; in fact, the 
competition for good issues is almost as keen as it is for direct obli- 
gations. 

Inasmuch as the reclamation and protection of wet and over- 
flowed land is a public improvement, the different legislatures have 
authorized the organization of drainage districts for this purpose or 
have provided that the work may be done under the supervision of 
existing governmental agencies. The owners of land in a defined 
area, suffering from the effects of water, decide to improve this land 
by the construction of canals and such other works as are necessary. 
A petition is prepared in accordance with the provisions of the statute 
and filed in the proper court. After notice has been given of the 
pendency of this petition, a hearing is held at which the court con- 
siders the case and decides whether or not the drainage district is a 
public benefit and should be organized. In case of an affirmative 
decision a decree or judgment is rendered, creating the district, and 
such steps are taken as are necessary to provide an administrative 
body. Landowners may appeal from this decree within a certain and 
limited time, in which event the proceedings are reviewed by a higher 
court. 

When the officials of the district are elected or appointed, they 
organize as a board of directors, elect officers, choose an attorney, and 
employ engineers, and take such other steps as are necessary to com- 
plete the organization. With the proceeds of preliminary taxes 
authorized by law, or with money borrowed on notes of the district, 
surveys are made and a definite plan of improvement is decided upon. 
When this plan has been approved by the court benefits and damages 
of the proposed drainage works are distributed among the owners of 



RURAL CREDITS 739 

the land affected. The assessed benefits represent the increased value 
which the law contemplates will accrue to the lands because of the 
improvement and, after confirmation, they become the basis of taxa- 
tion for the purpose of paying the cost of the improvement. To pro- 
vide the funds with which to construct the improvement, bonds, in 
most cases, are issued by the district. These bonds ordinarily yield 
from 5 J per cent to 6 per cent, are general obligations of the district, 
and are payable, both principal and interest, by taxes levied upon the 
real property against which benefits have been confirmed and in pro- 
portion to the same. In most cases the provisions authorizing the 
issuance of drainage bonds are very favorable and provide for serial 
maturities in substantial amounts within the reasonable life of the 
improvement. In some states the entire issue must mature within 
fifteen years; in others the limit is twenty, twenty-five, or thirty 
years, but twenty years is the rule, with substantial payments begin- 
ning as soon as the benefits are received. 

Draining or improving land by removing water or preventing over- 
flow, confers a special benefit which can be estimated with a reasonable 
and satisfactory degree of certainty ; hence it is equitable and proper 
that drainage taxes should be levied in proportion to the benefits and 
not in proportion to the value. An improved farm, located on the 
edge of a district, requires less drainage and receives less benefit than 
a piece of land which is covered by water all or a substantial part of 
the time. 

When drainage bonds are issued, the district pledges itself to pro- 
vide for the payment of the principal and interest by making such 
tax levies as are necessary. In most cases the total tax is levied and 
becomes a fixed lien upon the property, the district agreeing and 
binding itself to levy and collect certain annual instalments which 
will be sufficient to meet the requirements for principal and interest. 
In other cases the total tax is divided into instalments and set out for 
the various years, the annual instalments being extended against each 
tract of land. 

The following concrete examples are interesting: 

Twenty years ago a drainage district embracing 50,000 acres of land 
was organized; bonds aggregating $85,000 were issued and the work 
completed. Although the engineers and officials had had practically 
no experience in such work, this improvement resulted in practically 
all of the land in the district being opened for cultivation. At the 
time the district was organized the land was worth not more than 



74© AGRICULTURAL ECONOMICS 

$10 per acre, which furnished sufficient security for a debt of less than 
$2 per acre. By supplementing the drainage with additional work, 
an efficient system was produced. At the present time all of this land 
is in cultivation and is worth from $75 to $150 per acre. The bonds 
matured serially from two to fifteen years, the interest was always 
promptly paid and the different instalments retired at maturity. 
The taxes amounted to but a few cents per acre, were not burdensome, 
and were gladly paid. I watched the payment of these bonds and 
the development of this land with a great deal of interest because it 
furnished a concrete example of the organization of a drainage dis- 
trict, the completion and satisfactory maintenance of the work, and 
the prompt payment of the principal and interest of the bonds. At 
the present time the district is out of debt and its excellent record is 
a justification of the issuance of drainage bonds and their purchase by 
conservative investors. 

Another district, organized fifteen years ago, embraced 100,000 
acres and issued $200,000 of bonds maturing within twenty years. 
The work was completed promptly, has been efficiently maintained, 
and the land is in cultivation and covered with substantial improve- 
ments. Although but five instalments of the bonds are outstanding 
the district has surplus funds to cover the last two instalments and 
will probably only collect three additional tax levies. Fifteen years 
ago this land was worth $15 per acre; today the average value is at 
least $100 per acre. 

Another district, organized five years ago, embraced 45,000 acres 
of land and issued $350,000 of bonds. The drainage system is com- 
plete and 75 per cent of the land is in cultivation. Five instalments 
of the tax have been paid without controversy and three serial 
maturities of bonds retired, leaving fifteen more to be cared for. At 
the present rate, all of the district should be in cultivation within two 
or three years, and it is evident that the remaining taxes will be 
promptly paid so that the bonds may be retired on or before maturity. 
Since the organization of this district the land has doubled in 
value. 

The merits of drainage bonds are obvious. They present a com- 
bination of highly advantageous features. It is, therefore, only a 
natural result that they should be attractive to investors desiring a 
bond payable by taxation, free from income tax, and yielding a higher 
rate than is offered by direct obligations. These qualities insure a 
great demand. We can also foresee the supply for this demand 



RURAL CREDITS 741 

because it is claimed that 25,000,000 acres of land in the Mississippi 
Valley alone await improvement by drainage. I, therefore, commend 
the dpainage bond to your careful consideration. 

238. CREDIT EXTENSION BY THE IMPLEMENT DEALER 1 

An important feature of the harvesting-machine industry was the 
development at an early date of an elaborate system of distribution 
by the manufacturer. The principal explanation for this early devel- 
opment is to be found in the fact that the most important agricultural 
sections of the country were to a large extent recently settled, and the 
farmers were comparatively poor. Moreover, the credit facilities of 
the chief farming sections of the country were not adequate, appar- 
ently, to the need of agricultural development; the farmer, especially 
the new settler, was often unable to pay cash for the machines that 
were absolutely essential to the successful working of his farm, but, 
if furnished with such machines, was in a position to pay for them in 
instalments from the proceeds of his crops. Manufacturers who pro- 
duced and sold for cash would have, therefore, a limited market j while 
those who could give credit would greatly enlarge their sales. From 
these circumstances developed the practice, particularly among more 
successful manufacturers, such as McCormick, of selling their machines 
to the farmers on credit, the trade being conducted through retail 
dealers, who became local agents for the manufacturer for their 
respective localities. The usual form of payment made by the farmer 
for such machines was a part payment in cash at the end of the har- 
vesting season and a promissory note or notes for payment of the 
balance in one or two annual instalments. Such notes were generally 
guaranteed by the retail dealer who acted as the local agent for the 
manufacturer. 

The system of giving long credits to the farmer for purchasing 
reaping machines was established by Cyrus H. McCormick at the 
beginning of his business early in the fifties, or about 1855.-' It has 
been continued up to the present time, and it is a fact that the 
harvesting-machine business gives longer credit to the farmers than 
they receive from the manufacturers of any other goods they buy, 

1 Adapted from the Report of the United States Commissioner of Corporations 
on the International Harvester Co. (1913), pp. 55, 281-85, 340. 

2 This whole paragraph is taken from the statement submitted by the McCor- 
mick Harvesting Machine Co. to the bankers whose aid they were trying to secure 
in connection with the formation of the International Harvester Co, — EDITOR. 



742 AGRICULTURAL ECONOMICS 

Plows and spring tools are sold on short time or for cash. Twine is 
sold principally for cash in the fall of the year it is sold. The usual 
terms for harvesting machines are one- third in the fall of the year the 
machine is purchased (this is called cash), one-third the fall of the 
following season and one-third the fall of the second season, so that 
a farmer would have used the machine in three harvests before it was 
finally paid for. Excessive competition has extended this time until 
it frequently happens that a farmer has three years in which to pay 
for the machine after the season in which he purchased it. Competi- 
tion has also brought about the undesirable feature of giving a farmer 
a year's time without interest when the crop conditions are unfavor- 
able and he is not able to get full use out of his machine. It is also 
a custom to sell machines at the close of harvest on what are called 
"next year's time" without interest. That is to say, that if a farmer 
purchased a harvester or reaper in September of 1902, he gives his 
note without interest until the fall of 1903, and at that time he pays 
one- third cash, and one-third each in the fall of 1904, 1905. The 
policy of extending this long credit has worked to the advantage of 
the McCormick Company in some ways by increasing sales, but if 
the collection departments of all the various companies were managed 
together, many improvements upon this system could be effected by 
shortening the length of credit and by making the examination of the 
paper taken in payment more rigid. 

The rates of interest which the International Harvester Co. 
charges on the notes it receives depend apparently to some extent, 
at least, on the laws of the respective states in which the business is 
done. The International Harvester Co. submitted the table shown 
on p. 743 to the Bureau, which shows in a comprehensive way the 
variations in this respect. 

The International Harvester Co. not only perpetuated the system 
of selling harvesting machines on long terms of credit but also after 
it entered into the production and sale of various new lines, it applied 
the same system to them also. It is especially able to do this on 
account of its financial resources. Most of these new lines were 
formerly sold for cash or on short terms of credit. Representatives 
of the International Harvester Co. claim that its leading competitors 
grant equally long credits, and declare that its policy is to develop 
as far and as rapidly as possible the system of cash sales — that is, 
cash payment in the same season as the goods are purchased — and 
that discounts for cash are allowed for this reason. 






RURAL CREDITS 



743 



While in some localities there has been a great increase in the pro- 
portion of cash sales, nevertheless, taking the business of the Inter- 
national Harvester Co. as a whole, it appears that the proportion of 
sales on long credit (i.e., one or more years) to total sales has shown 
an increasing tendency, especially in very recent years. This increase 
in the proportion of credit sales is partly due, at least, to the applica- 
tion of long credits on the new lines for which they were formerly 
uncommon. 



TABLE LXXIII 

Variations in the Rates of Interest Received by the International 

Harvester Co. on Farmers' Notes in the United 

States, by States in 191 i 



State 


Rate of 

Interest 

before 

Maturity 


Rate of 

Interest 

after 

Maturity 


State 


Rate of 

Interest 

before 

Maturity 


Rate of 
Interest 

after 
Maturity 


Alabama 


8 
8 


IO 


Nebraska 


7 
8 
6 
6 
6 


IO 


Arkansas 

California .... * 


Nevada 

New Hampshire 

New Jersey 


IO 


Colorado 


8 
6 
6 
8 

7 
8 
6 
6 
8 
6 
8 
6 
8 
6 
6 
6 
6 
7 
7 
7 
8 


IO 
IO 

8 
10 

7 

8 

.„.. 

10 

"&" 
.„.. 

7 

10 

8 

10 






New York. 




Delaware 

Florida 

Georgia 

Idaho 

Illinois 

Indiana 

Indian Territory 

Iowa 


North Carolina 

North Dakota 

Ohio 

Oklahoma 

Oregon 

Pennsylvania 

Rhode Island 

South Carolina 

South Dakota 

Tennessee 

Texas 

Utah 

Vermont 

Virginia 

Washington 

West Virginia 

Wisconsin 

W T yoming 


6 
8 
6 
8 
8 
6 
6 

7 
8 
6 
8 
8 
6 
6 
8 
6 
6 
8 


IO 

8 
10 
10 

"k" 

8 


Kansas 

Kentucky 

Louisiana 

Maine 


10 

10 
10 


Maryland 

Massachusetts 

Michigan 

Minnesota 

Mississippi 

Missouri 

Montana 


10 

*"s" 

10 



Table LXXIV, p. 744, furnished by the International Harvester 
Co., shows the percentage of cash sales and credit sales to total sales 
of the International Harvester Co. (for its agricultural implement 
business) in the United States. 

According to this table, the cash sales have shown, on the whole, 
a declining tendency, particularly in the most recent years. Data 



744 



AGRICULTURAL ECONOMICS 



were not available for 1903. The proportion of cash sales ranged 
from 74.4 per cent in 1905 to 64.2 per cent in 191 1. There was, of 
course, a corresponding increase in the credit sales, which in 191 1 
reached the maximum, namely, 35 .8 per cent. 



TABLE LXXIV 

Comparison of Percentages of Cash and Credit Sales to Total Sales 

of the International Harvester Co. in the 

United States, 1 904-1 911 



Year 


Percentage of 
Sales for Cash 


Percentage 
of Sales for 
Notes and 
Accounts 


Year 


Percentage of 
Sales for Cash 


Percentage 

of Sales for 

Notes and 

Accounts 


I904* 

!9°5 

1906 

I907 


70.9 
74-4 
70.3 
67-3 


311 
25.6 
29.7 
32.7 


1908 

!909 

1910 

1911 


69.4 
68.9 
66.4 
64.2 


30.6 
311 
33-6 
35-8 



* Percentages as in original statement; do not equal ioo. 



Examining the amounts of notes of various maturities taken in 
each year, we find that notes for the longer terms have shown an 
almost uninterrupted decline. Thus, three-year notes constituted 
14 .4 per cent of the total in 1904 and only 6 . 5 per cent in 191 1, while 
four-year notes sank from 2 .9 per cent in 1904 to only 0.4 per cent 
in 191 1. Practically no five-year notes were taken. For the three- 
and four-year notes combined, the amount taken by the International 
Harvester Co. was 17 .3 per cent of the total notes in 1904, and only 
6.9 per cent in 191 1. For one-year notes the proportion taken in 
1904 was 34.7 per cent and 28 .9 per cent in 191 1, while for the two- 
year notes the proportion taken in 1904 was 48 .0 per cent and 64.2 
per cent in 191 1. Taking these two classes together, the percentage 
was 82.7 in 1904 and 93.1 in 191 1. 

The assistant general manager of the International Harvester Co. 
insisted, however, that the company was earnestly trying to reduce 
the proportion of credit sales generally. "We should be very glad," 
he said, "if some plan could be worked out by other interests than 
ours to do more of the financing of the farmer. Broadly, our policy 
has been to try to shorten the terms, and we have met with compara- 
tively little success." 



RURAL CREDITS 745 

239. STORE CREDIT IN THE SOUTH 1 
By LEWIS H. HANEY 

A majority of the tenant farmers find in the country merchant 
their chief source of credit; and store credit and crop mortgage 
arrangements form a dark place in the Texas farm credit system. 
Virtually all negro tenants, and 75 per cent to 90 per cent of the white 
tenants, foreigners and the best black-land tenants excepted, regularly 
depend upon advances of credit from the local storekeeper for food, 
clothes, and various supplies, and give mortgages on their crops as 
security. Probably less than 10 per cent of farm owners are accom- 
modated in this way, and the percentage of white tenants seems to be 
on the decrease in most sections. The nominal interest rate is always 
10 per cent. 

The system usually works as follows : At the end of the year those 
who have secured advances on a crop mortgage have little or nothing 
left. One of them will go to his merchant about February 1, and 
ask for credit until he can make a crop in the fall. The merchant will 
agree to extend a certain amount of credit in return for a mortgage 
on the prospective crops of the tenant and any other property which 
he may own — which is often nothing. Often the acreage in cotton 
is considered, and whites may be allowed about $5 an acre and negroes 
from $3 . 50 to $4 . 00. Generally, however, the amount is not formally 
figured in this way, but a maximum allowance per month is set, being 
about $30 for whites, and somewhat less for negroes. The amount 
varies with the community, and may run up to from $60 to $75 a 
month in a German community. As low a limit as $15 may be set. 
It depends on the character of the tenant and the number of his teams. 
The aggregate amount for the season, then, is the product of the 
monthly allowance and the number of months, say nine months. The 
character of the security is indicated by a crop mortgage form which 
accompanies the farmer's note. 

This crop mortgage system is satisfactory to no one but the dis- 
honest storekeeper — not all storekeepers are dishonest. The interest 
is nearly always deducted in advance, and it is almost universally 
complained that the borrower is overcharged for his goods. If the 
farmer borrows $300 he gets only $270 in cash, and is given the worst 
bacon and flour at the price of the best. Once the mortgage is given, 
the tenant becomes the storekeeper's man; for he must depend on 

1 Adapted from American Economic Review, IV (March, 1914), 50-55. 



746 AGRICULTURAL ECONOMICS 

credit, and all his credit is pledged. He, or his trade at least, is 
regarded as the possession of the merchant who holds the mortgage 
on his crop. Then, at the end of the season, he is not infrequently 
virtually compelled to sell his cotton to the storekeeper, and as a 
result often fails to get its full value. The same is true of the farmer's 
other market produce, such as chickens and eggs. The total actual 
interest paid under such circumstances averages at least 20 per cent. 
On the other hand, the tenant is often a shiftless and unreliable 
person and the percentage of bad debts is high. In this way a big 
sum of debt accumulates, and, in order to cut a long debt short, the 
tenant " pulls up" and leaves the country. All this is true, to say 
nothing of the social harm done by the continuous planting of a single 
crop (cotton) which the system demands. 

Here someone asks, Why do farmers ever go to storekeepers? 
Why do they not get cash from the banks, and buy on a cash basis ? 

The reasons are numerous and cogent. (1) The banks do not like 
long loans and often refuse to make them; the tenant wants credit 
for nine months. (2) From August to January it is generally hard 
to get money at the banks; the tenant wants someone to run him 
through the whole year. This the storekeeper will do. (3) The banks 
do not want to make small loans ; the tenant wants no other. (4) Too 
much security is required by the banks; the tenant often has nothing 
to pledge that is not bought on time. (5) Banks generally will not 
take crop mortgage security. (6) This kind of credit business requires 
close local supervision, even to the extent of directing the tenant's 
farming operations in not a few cases, and such intimate knowledge 
and care the banks cannot give. 

In a very real way, however, the country merchants act as the 
banker's agents in making crop mortgage loans, the business being 
farmed out to them, as it were. From 5 per cent to 20 per cent of 
the loans of many Texas banks are made to country merchants, such 
loans being " largely" or "almost entirely" used to carry farmers -on 
crop mortgage security. The interest paid is usually 8 per cent. As 
security, the merchants endorse and turn over to the banks the 
farmers' notes and crop mortgages. They do not, however, receive 
dollar for dollar on such security. In this way, indirectly, the banks 
carry a larger part of tenant farmers than would at first appear to 
be the case. 

About two-thirds of the sales made by hardware and implement 
dealers to Texas cotton farmers are on time to be paid out of the 



RURAL CREDITS 747 

cotton crop in the fall. The credit price is higher than the cash price 
by an amount which varies with the interest rate but which may 
safely be put at 10 per cent. In the case of unreliable farmers and 
tenants, a mortgage is taken on the article sold and the purchaser 
gives his note. 

It is probable that in most parts of central Texas over 90 per cent 
of those tenants who owe the store are also indebted to their landlord 
for larger or smaller advances. Storekeepers, as such, only give 
credit on food, supplies, implements, etc., whereas cash or its equiva- 
lent is often needed for mules, feed, and other current expenses. The 
landlord is practically always involved in supplying this cash. He 
may make small cash advances in a bad season; and he often sells 
his tenants teams and feed to be paid for out of the crop. But for 
larger cash advances the practice is not uniform. In the bottoms of 
the Brazos and Colorado, and in a few places in the "black-land belt," 
there are large "plantations" whose owners prefer as a rule to "accom- 
modate" their own tenants rather than to "stand for" them with the 
bank or other lenders. This gives them greater control over their 
tenants, and unscrupulous landlords may make larger profits by 
charging high rates. To carry their tenants they may borrow several 
thousand dollars from the bank each year. Such landlords often make 
a business of running a sort of commissary. 

On the other hand, the owners of medium and small farms in the 
black-land belt and sandy regions to the east do not lend any con- 
siderable amount of cash to their tenants, though they sometimes 
help them to borrow elsewhere. On the whole, they would rather the 
tenant would get his money in his own way. 

240. LOANS FOR THE CATTLE-MAN 1 
By J. F. EBERSOLE 

The cattle loan company, commonly referred to as "cattle bank," 
is a middleman between borrowing cattle-owners and lending bank- 
managers. Its business methods and forms closely parallel those of 
real estate mortgage loan companies, except for the fact that cattle 
loans are of shorter duration and secured by mortgages of the chattel 
variety. Cattle loan companies, incorporated under state charters, 
have been operating in such cities as Fort Worth, Denver, East St. 

'From "Cattle Loan Banks," Journal of Political Economy, XXII June. 
1914), 577-8o. 



748 AGRICULTURAL ECONOMICS 

Louis, St. Joseph, Portland, South St. Paul, Omaha (2), and Kansas 
City (3), some of them for over twelve years; and one of them is now 
being organized in Chicago. These companies have a paid-in capital 
stock ranging from $50,000 to $300,000, and are usually closely affiliated 
with a national or state bank, as are trust companies in the larger cities. 

These companies are informed of desired loans through country 
bankers or by receipt of direct applications, the latter usually from 
the larger " cattle-growers." In some cases the company on its own 
initiative urges cattlemen in whom it has particular confidence to 
undertake feeding operations at a time when the beef market offers 
a favorable opportunity for such production. In every case a salaried 
examiner of the company inspects the plant and herd of the cattle- 
grower and his personal capacity and integrity before the granting of 
a loan. And thereafter the examiner, on his regular circuit, maintains 
a continuous inspection and volunteers advice designed to protect 
the value of the security given for the loan. When a loan appli- 
cation has been acted on favorably, a promissory note and chattel 
mortgage are taken. The funds of the company then advanced to 
the borrowers may be utilized to buy more cattle, to pay outstanding 
debts such as those for feeding expense, or, as is often the case, to 
pay for the very cattle which are pledged as security for the loan. 
In a few cases where the cattle-grower enjoys an exceptional credit, 
funds will be advanced for the full purchase price of a herd for 
seasonal feeding purposes, or to develop two-year-olds into finished 
four-year-old beef cattle. The loans granted are seldom less than 
60 per cent of the known value of the cattle. 

To secure a buyer for the note and mortgage is the second primary 
function of the cattle loan company. If the loan is a small one, 
usually $10,000, it may be sold entire, the chattel mortgage assigned, 
and the note indorsed to the buyer. If the loan is a large one, of 
$50,000 to $100,000, it is necessary to subdivide it in order to provide 
a ready sale. The mortgage and note are assigned in parts of $5,000, 
$20,000, or other denominations, to suit the convenience of the buyers 
of the paper. In this case the assigned parts, since they are indorsed 
by the loan company, are equivalent to a "debenture" issue secured 
by a pledge of specified assets held by the company for the protection 
of the note-holders. The size of mortgage loan most frequently made 
is $10,000, while loans of $100,000 are exceptional. 

The business of cattle loan companies approaches closely to the 
functions of the commercial paper broker. The cattle loan company 






RURAL CREDITS 749 

has an advantage over the commercial paper broker in that the 
favorable location of the company — always at the receiving cattle- 
market of the district in which its loans are exclusively placed — 
enables it fully to protect its interests by claiming the proceeds of 
sales of mortgaged cattle. This is particularly true in the case 
of range cattle, which can be readily identified by the mortgaged 
brands. 

To cover expenses of administration the cattle loan company 
secures for itself a part of the interest paid on the loan. The rate 
charged the borrower is usually determined by conditions in the 
locality where it is made, sometimes running as high as 10 per cent, 
and again, influenced by general rates for capital, falling as low as 
7 per cent. From this gross interest charge a commission has to be 
given to the local banker who makes the loan, expenses of examination 
and management must be met, and an appropriation made to a con- 
tingency reserve fund to cover occasional losses incurred from the 
circumstance that the companies usually become surety, by indorse- 
ment, for the final payment of all the loans which they have placed 
with lenders. These deductions determine what may be safely paid 
to eastern purchasers of the paper, usually 5 or 6 per cent. 

Holders of cattle paper have never suffered in times of financial 
panic from failure to pay at maturity. Cattle, like grain, are a cash 
commodity purchased by retailers and sold by them, largely for cash, 
to satisfy a relatively constant consuming demand. This character- 
istic is retained even in times of panic. 

Maturities are usually six months for feeding purposes; and less 
often of two and one-half years for developing two-year-olds for 
market. This two-and-one-half-year paper is occasionally converted 
into the six-month variety by the sale of notes running for six months, 
based upon the two-and-one-half-year mortgage. These notes are 
taken up at maturity by the loan company and reissued or renewed 
for like succeeding periods until the original loan is repaid. 

It is to be expected that the operation of a Federal Reserve act 
will cause this form of loan to increase in desirability in the near 
future. Eastern bankers possessing these six-month notes will prob- 
ably find them readily rediscountable with the local federal reserve 
bank at any time up to maturity. And a considerable amount of 
two-and-one-half-year notes may be held to advantage, since, if 
properly selected with successive maturities, one-fifth of their total 
amount will be immediately rediscountable when necessary. 



750 AGRICULTURAL ECONOMICS 

By rendering this form of agricultural paper liquid before maturity 
the Federal Reserve act will have become a most important influence 
for enlarging the amount of capital devoted to this branch of industry. 
Already eastern bankers have scouts touring the western states to 
study this form of banking with a view to investing several millions 
of dollars each. Interest rates upon these loans will unquestionably 
be reduced in time through such increased competition of lenders. 
The loan companies will hardly suffer, however. While charging the 
cattle-grower less, they will be enjoying a large turnover and should 
welcome this new development. The four or five million dollars 
placed in such loans yearly by the average loan company, as at present 
constituted, is but a fraction of the loans that may be placed by them 
within a few years. By reducing the interest cost charged to cattle- 
growers an important service will have been performed for the con- 
sumer. This phase of the operations of the Federal Reserve act will 
be of distinct benefit, and possibly the least dangerous of all forms of 
legislation designed to assist American agriculture. 

C. Utilizing and Improving Existing Credit Agencies 

241. WHAT THE FARM MORTGAGE BANKERS OFFER 1 
By F. W. THOMPSON 

In touching upon the subject of "What the Farm Mortgage 
Bankers Offer," I shall confine my remarks principally to the facilities 
now at hand, and what the farm mortgage bankers have to suggest 
as a means of increasing these facilities for financing land mortgage 
loans for the American farmer. The farm mortgage bankers include 
country and city bankers, farm mortgage investment bankers, and 
individuals and co-partnerships, who do not only make farm loans 
for their own investment but who act as agents or brokers for the 
investment of funds foreign to the locality in which the loan is situated. 

These foreign investments have been computed to total two-fifths 
of a grand total of nearly $3,000,000,000 of the estimated total of 
farm mortgages in force in the United States at the present date. 
Hostile legislation against foreign corporations, building a wall around 
state boundaries, has had a reversal of the objects to be accomplished 

1 Adapted from an address of the president of the Farm Mortgage Bankers' 
Association of America, delivered at the National Conference on Marketing and 
Farm Credits, Chicago, December 2, 1915, and printed in the Bulletin of the Farm 
Mortgage Bankers' Association, January, 1916. 



RURAL CREDITS 751 

and has resulted uniformly in higher rates for money. The competi- 
tion of highly organized corporation bonded indebtedness, where, for 
the most part, the income tax is paid by such corporations, has to a 
large extent up to the present time diminished the amount of money 
available for farm mortgage investment. 

Farm mortgage bankers have persistently battled against these 
obstacles and have been very largely responsible for the lowering of 
rates, and significantly may I state that instead of being blamed for 
the high rate prevailing in some sections of the United States they 
should be praised for their consistent endeavor to overcome handicaps 
imposed upon the farm mortgage borrower in the good sections. 
These same bankers, defined in the fore part of this paper, have 
negotiated nearly $2,000,000,000 of the farm mortgages in force and 
nearly all of the $1,200,000,000 held by insurance companies, trust 
companies, and savings banks of the United States, which latter 
volume of business represents the lowest average rate paid by farm 
borrowers in all sections of the United States. This may be a surprise 
to some people who have an erroneous idea that the farm mortgage 
banker is gouging the life out of the American farmer. 

There seems to be a general impression abroad that, in our country, 
the mortgage debt of the American farmer was forced upon him and 
that he is suffering a tremendous handicap by virtue of this indebted- 
ness. If one would but stop to think, he would coon come to the con- 
clusion that this impression is wholly wrong and without foundation. 
Instead of being a burden, it has been the chief cause of our wonderful 
agricultural development. The business of farm mortgage banking 
is quite the reverse of other banking activities in that the lender seeks 
the borrower to a much greater extent than in any other line of 
banking. If one would stop to consider the rate of interest paid under 
present conditions as compared with the flat rate contemplated in 
proposed legislation (and I am now talking about the great bulk of 
mortgages, where after making liberal allowances we may assume that 
the rate paid by the borrower in the comparatively highly developed 
agricultural sections would not exceed 6J per cent), it can readily be 
seen that the contemplated saving will not exceed J of 1 per cent per 
annum, 6 per cent being the proposed flat rate. By computing land 
values on the basis of $100 per acre, which is a fair average for lands 
in the better sections of the United States, and assuming that these 
farms are encumbered to the extent of 50 per cent of their value, or 
at $50 per acre, the annual saving per acre would be exactly 12^ cents. 



752 AGRICULTURAL ECONOMICS 

In the sections where higher rates and lower valuations prevail, and 
where a much lower volume of loans is in force, we will assume that 
the difference in savings would be 3 per cent per annum, or 75 cents 
per acre based on loans not exceeding $25 per acre on a $50 per acre 
valuation. 

There are those who would have us believe that the difference in 
saving to the farm mortgage borrower under the present farm mort- 
gage banking system and under that proposed in the various bills in 
Congress is the sole barrier between him and unbroken prosperity; 
that the 12 J cents per acre saving in the one case here used and the 
75 cents per acre in the other represents the difference between poverty 
and affluence with the man on the farm. Such argument is not only 
fallacious, but is extremely feeble and tends to befog a true understand- 
ing of conditions as they exist today in the United States. Greater 
stress might profitably be laid upon correcting evils as to methods of 
management and costs of production on the farm, before attempting 
to reduce interest rates on farm mortgages in the face of conditions ( 
that do not warrant such reduction. Better farming methods, less 
waste, and systematized marketing facilities will be followed by lower 
interest rates as surely as day follows night and not before. The 
development of our agricultural sections in the East and Middle West, 
as compared with the South and West, amply demonstrates this 
theory. 

I have witnessed the average in unit loans in Iowa and Illinois 
grow from $3,000 to $8,000 in ten years. Ten years ago it cost the 
borrower from 3 per cent to 5 per cent commission above the basis 
rate spread over a period of five years, or f per cent to 1 per cent per 
annum, or a gross of from $90 to $150 on a $3,000 average size loan, 
and at present the gross commission rate paid rarely exceeds 2 per 
cent and is somewhat lower in a great many cases or in amounts 
ranging from $80 to $160 for a loan of $8,000 covering a like period 
of time or £ per cent to f per cent per annum. It costs as many 
dollars to make a $1,000 loan as it does to make one for $10,000, and 
it is not reasonable to expect that the rate of commission will be as 
low in districts where loan units average $1,000 to $2,000 as in that 
district where the limit is five to ten times as great. There is some 
need of reform in the cost of appraisement, while it must be admitted 
that as the hazard increases, the more frequent must be the inspection 
and investigation, and consequently a greater cost per unit. It must 
also be admitted that it costs more to convince investors of the 



RURAL CREDITS 753 

desirability of loans arising in districts not quite as standard as in 
the agricultural districts known as the corn belt. 

Farm mortgage bankers have a sincere appreciation of the diffi- 
culties confronting the serious minded people who are concerned with 
the future of the homeless tenant. A great many people think in 
average sized terms of acreage approximating 160 acres in contem- 
plating land that should be purchased by the homeless tenant. 

Tenancy is with us in all farming sections and is growing with 
alarming rapidity in our best developed sections. It is useless to 
think of tenants, without considerable money in hand, buying land 
in 160 acre or larger units when prices for land run from $75 to $250 
per acre. 

Protracted periods of drouth and rainfall and other elemental dis- 
turbances amplified by crop pests, sickness in the family, etc., make 
the hazard great and no one should seriously think of promulgating 
a system of rural credits based upon mortgages taken to finance such 
purchases and issue bonds against them, unless they were protected 
by a state or government guaranty, which guaranty in turn would 
have to have behind it a cash fund of sufficient magnitude to protect 
the investor in such a bond against defaults from whatever cause. 
The constitutionality of such a guaranty, however, is a grave question. 

It seems, therefore, that until the homeless tenant acquires a fund 
large enough to pay or obtain credit to permit him to pay at least 
50 per cent of the purchase price of land desired, he must be dismissed 
from participating in any scheme of long credit such as is now con- 
templated. As discouraging as this may seem, there is a way out 
of the dilemma in my opinion, if we can get our homeless tenant to 
think in terms of smaller acreage and to think in terms of intensive 
instead of extensive farming. Instead of thinking of 160 to 320 acre 
farms, start on a 5 or 10 acre farm close enough to a fairly good town 
with good school and church facilities to take care of the social needs 
of the family and if need be rent a small cottage in the village and work 
the 5 or 10 acre tract for all it can produce. 

Right here is where the building and loan association can do the 
service it does in building homes for salaried people living in small 
villages and towns, and if the man and his family have the right kind 
of stuff in them they will soon have accumulated enough with what 
help the building and loan association can give them, and be glad of 
the chance, to erect a comfortable home and otherwise improve the 
property as the case may require. Small acreage property under a 



754 AGRICULTURAL ECONOMICS 

high state of cultivation is about as salable a proposition as can be 
found and the hazard of loss to both the owner and lender is reduced 
to a minimum. 

Farm mortgage bankers are concerned principally in long term 
mortgage credit. They have had years of experience ranging from 
ten to fifty years in granting this kind of credit. There have been 
failures in this line of business just as in all other business ventures, 
but I think I am safe in saying that less money has been actually lost 
by farm mortgage bankers for their clients than through any other 
line of investment securities, excepting possibly municipal bonds sup- 
ported by the taxing power of our various branches of government. 
None of the farm mortgage bankers has grown excessively rich out 
of this business. It has been profitable, but not excessively so. 

One of the features most prominently mentioned in proposed legis- 
lation is the predicating of mortgage loans as security for debentures 
issued in convenient form and maturity to attract the small investor. 
Most of the well meaning enthusiasts glibly say that these bonds will 
find a ready market and that all that is needed is to have a sort of 
government paternalism cast over these bonds to make them eagerly 
sought after by the public. 

The experience of several companies doing this business has 
brought to light enough troubles and handicaps to cause me to say 
that this kind of financing should be handled with extreme caution 
and that the supervisory control of the government should be worked 
to its highest efficiency before launching this craft out upon the invest- 
ment sea. Contrary to past experience, mortgages of the most 
superior merit regarding security and moral hazard should be the 
ones that should be trusteed for bond issues, rather than to counte- 
nance the practice of placing in the debenture trust such mortgages 
as do not in themselves possess sufficient attractiveness to find a ready 
market. 

Knowing the business of farm mortgage banking thoroughly, both 
as to its strength and weakness and as to the desirability of 
handling and selling both mortgages and bonds the farm mortgage 
bankers of the United States in convention assembled at St. Louis 
in October, 191 5, after having months of study and serious considera- 
tion regarding proposed legislation by the coming Congress, adopted 
the following resolutions: 

This Association was formed and exists to further any action which 
will facilitate rural credits, whether by legislation or individual or organized 



RURAL CREDITS 755 

private effort. We therefore favor rural credit legislation so far as it may, 
without violation of the constitutional and other vital principles of our 
form of government, and without disregard to economic law, be effected 
to the common advantage of the borrowers and the lenders of the country. 

The Association recognizes that there are defects and deficiencies in 
the facilities open to the tenant without land, or the newcomer — either 
immigrant or city-bred — who would go on the land. This Association 
applauds the efforts to help both the nation and this type of individual by 
financing his establishment on the land, and would be pleased to render 
any assistance within its power to such a movement. 

In considering the phase of rural credit having to do with long term 
loans on the security of land the Association accepts the following funda- 
mental propositions: 

i. The object to be accomplished is to so mobilize this form of rural 
credit as to make it available to every land-owning farmer in the United 
States on terms as favorable as the market affords, consistent with the 
security offered. 

2. To accomplish this object it is neither necessary nor consistent with 
the principles on which this government is founded, to lend to farmers as 
a class either the credit of the nation or its monies, either directly by govern- 
ment loans, or indirectly by subsidies or guaranties. 

3. The object is, rather, attainable by removing those obstacles, legal 
and otherwise, which prevent the farmer's paper from reaching the invest- 
ment market generally in such form, on such terms, and from such a source 
as to make it at least as acceptable in the matter of assured security, con- 
venience of handling and convertibility, as any other investment of equal 
intrinsic merit. 

This Association believes this object, once attained, would provide for 
the farmer: 

1. Credit in quantity much greater than at present, and in quantity 
certainly sufficient for all legitimate purposes. 

2. Credit on a basis of intrinsic security, rather than of extrinsic factors 
such as the special laws of any given state, the distance of the security from 
the source of the funds, the terms as to maturity, etc., on which it was 
desired to borrow the money. This result would be gradual, requiring the 
amendment of the state laws as to titles, collections, taxation, etc., among 
other changes dependent on the citizens of the states, and not on anything 
the federal government can do by statute. 

3. Loans for long terms, as well as short terms, "straight" or serial 
maturity, or amortized as to principal, the latter free from renewal worries 
or expense. 

4. As low rates of interest as the free play of supply and demand in the 
investment market affords, when not encumbered by the factors of lack of 



756 AGRICULTURAL ECONOMICS 

confidence, lack of convenient form, convertibility, and legality for certain 
funds, which factors now bar the farm mortgage from a very large market. 
We do not believe that lower rates can be obtained in any other way, and 
least by arbitrarily trying to fix by statute either interest rate or margin of 
profit or terms of negotiation. 

Any rural credit legislation which fails to utilize present farm 
mortgage banking machinery and seeks to establish a wholly new 
order of negotiating or selling agencies would be highly undesirable. 
The experience of farm mortgage bankers, acquired through many 
years of handling farm loans ought not to be cast aside without an 
effort to make the largest and fullest use of it. 

242. THE BANKERS' EFFORT TO IMPROVE PERSONAL CREDIT 
IN THE SOUTH 1 

By JOSEPH HIRSCH 

We hope to show southern bankers, and particularly country 
bankers, who advance to southern farmers, year after year, the money 
necessary to produce the crop, that it is a much safer and a much 
saner business proposition gradually to liquidate the obligations of 
southern farmers by the gradual sale of their crop, the banks retaining 
in their possession the notes of the farmers secured by the actual 
collateral of cotton warehouse receipts on cotton properly insured, 
than it is to force the immediate sale of this cotton and the immediate 
liquidation of the farm debts by transferring this obligation to the 
debit side of their ledgers in the shape of bills of exchange. That it 
is much safer for a country bank to have the notes of, say, five hundred 
farmers for $500.00 each, secured by cotton amply margined, than 
it is to have the same $250,000 in the shape of obligations of a few 
cotton speculators, imperfectly margined, and subject to a severe loss 
through depreciation in price. 

In order to provide better facilities for the general storage of 
cotton, I believe that a special committee of this organization should 
be appointed to confer with the warehouse commissioners of the 
various southern states, with the fire underwriters, and with the 
Department of Agriculture, to the end that we may distribute plans 
for the construction of up-state warehouses at a moderate cost. The 
Texas Bankers' Warehouse Committee, in its campaign, furnished 

1 Adapted from president's report at the Conference of Cotton States Bankers, 
New Orleans, December 6-7, 1915. Stenographic report of proceedings loaned 
by the secretary, Mr. Moorhead Wright. 



RURAL CREDITS 757 

plans and specifications of model cotton warehouses capable of 
construction at a cost of from $i .00 to $1 .25 per bale capacity. I 
hope the Conference will appoint at this session a special committee 
on uniform warehouse laws, to the end that there may be adopted, 
as the ultimate outcome of this Conference, some uniform warehouse 
law and some uniform cotton warehouse receipt applicable to every 
southern state. 

But probably the most important problem confronting the present 
Conference is the outlining of a vigorous campaign for the continua- 
tion of crop diversification in the South during the year 1916, and 
to this end I believe that every possible agency of the Southern 
States Bankers' Association should be brought to bear. As a result 
of an increase of seven million acres planted to feed and food, southern 
farmers have produced the 191 5 cotton crop at the lowest cost in 
many years. It seems to me that prudent and conservative banking 
should dictate that, in so far as possible, southern bankers base their 
credits to southern farmers next year upon their self-supporting 
ability. I believe that each state association should, beginning 
immediately, conduct a campaign all over the South under the aus- 
pices of the bankers' agricultural committees acting in conjunction 
with the United States Department of Agriculture and the agricul- 
tural and mechanical colleges. For, while I believe that the average 
southern banker realizes that sufficient feed and food acreage, and 
the raising of the farmer's meat supply on the farm mean a greater 
prosperity and safer banking for the South, how many southern 
bankers will take the initiative, basing their loans upon this condi- 
tion, and requiring of southern farmers the insurance policy of suffi- 
cient feed and food for self-support ? Dr. Bradford Knapp suggests a 
farm credit rate sheet, in order to make sure of self-support, to be 
used by bankers and merchants in giving credit to farmers. 

243. THE RATE-SHEET AS A MEANS OF STANDARDIZING 

CREDIT 

Texas bankers who make a practice of loaning money to farmers 
have adopted, for their own protection and for the guidance of bor- 
rowers, what is known as a "crop rate sheet for safe farming and bank 
credit." Taking a 40-acre two-horse farm as a unit, this sheet states 
the live stock and the quantity of food and feed crops necessary to 
support on such a farm a family of five. The prospective borrower 
is requested to state in the same way the actual system followed on 



758 AGRICULTURAL ECONOMICS 

his own farm. The closer the actual practice approaches the system 
outlined in the rate sheet, the better is the farmer's credit. 

The bankers consider that the following arrangement is a safe 
basis, for borrowing and for loaning money: 

FOOD CROPS 

Four pigs for 1,000 pounds of pork. 

Fifty laying hens or equivalent in other poultry. 

Two cows, one in milk constantly. 

One acre for constant supply of fresh vegetables and canning; cow peas 
and other beans, to be grown in corn; area sweet potatoes, one-quarter 
acre; area for syrup, one-quarter acre sorghum or sugar cane; pumpkins 
and cushaws, to be planted in corn for good food and feed; one and one- 
half acre pasture. For winter pasture sow a grain between the cotton rows. 

TEED CROPS 

Acres corn with cowpeas, corn shocked, 240 bushels on 12 acres, at 20 
bushels per acre; 48 bushels cowpeas, at four bushels per acre; corn stover, 
four tons; acres in hay crops, 12! tons, five acres sorghum, Sudan or other 
hay; total acres food and feed, 20 acres. 

COTTON, MONEY CROP 

Acres in cotton, 20 acres; total acres in crops, 40 acres, two-horse farm. 

For the purpose of the rate sheet, it is assumed that the yield of 
cotton will be one- third of a bale per acre, and of corn 20 bushels an 
acre. A farm managed in this way will yield, according to the 
bankers, an income of $664 . 78, with cotton at 8 cents a pound, and 
of $698.08, with cotton at 10 cents. On the other hand, the all- 
cotton farm, with the same prices for cotton, will have an income of 
only $460 or $560. 

In drawing up these estimates, the labor factor is not considered, 
although the all-cotton farm probably requires more than the food 
and feed farm. Furthermore, the fact that 20 acres of cotton can be 
worked more carefully and a greater yield per acre secured than 40 
acres, is not taken into account. It is probable, however, that when 
qnly 20 acres are planted to cotton, a yield of one-half a bale, instead 
of one-third could be secured. The food that the food-and-feed 
farmer grows for his own use is credited to him at the same price that 
the all-cotton farmer would have to pay for it. The objection that 
this food may be more than the farmer's family needs is answered by 
the fact that some of the products may be exchanged for flour, sugar, 



RURAL CREDITS 759 

etc., or that the excess quantity may be sold or converted into more 
live stock. 

In sending out this rate sheet with the accompanying tables show- 
ing the incomes from the all-cotton and the cotton, food, and feed 
farms, the Texas Bankers' Association declares that the statement it 
is asking the farmers to make is a similar one to that required of all 
merchants seeking loans. 

The system adopted as a basis for credit is not, of course, to be 
considered as inflexible, or as applicable to every section of the cotton 
states. It does, however, serve as a valuable guide for determining 
to what extent the farmer is conducting his business on sound prin- 
ciples. It is pointed out that no bank ever cares to foreclose on 
mortgages, and that it is most important, therefore, to have some 
means of judging of the borrower's ability to meet his obligations. 

244. RESULTS ATTAINED UNDER THE FEDERAL RESERVE 

ACT 1 

The Board has given much attention to the adoption of appro- 
priate measures intended to promote the ready movement of crops. 
All this has been done upon a basis furnished by the general work 
previously accomplished in defining commercial paper and in issuing 
standard regulations designed to describe the essential elements of the 
principal types. Very satisfactory results have been accomplished 
through these efforts. The crop-moving season has been unusually 
easy with exceptionally little strain or indication of stringency in any 
locality. The fact that commodity paper, that is, notes and bills 
secured by readily marketable staples, has been acquired in large 
amounts at rates from 3 to 3 J per cent, and that long-time agricultural 
paper has, subject to the restrictions of the law, been freely taken by 
the reserve banks whenever offered, shows what the system can do 
for the agricultural short-time borrower. 

In order to be prepared for any contingency that might arise in 
connection with the marketing of the cotton crop, the Board, in June, 
191 5, appointed a special committee to study the condition and needs 
of the cotton-growing districts. The committee, realizing the impor- 
tance of fostering a financial condition in which producers would not be 
obliged to sacrifice their cotton, but would be assisted in the gradual 
and orderly marketing of the crop, began its work by investigating 

1 Adapted from Second Annual Report of the Federal Reserve Board, pp. 3-9, 
70, 324- 



760 AGRICULTURAL ECONOMICS 

warehouse facilities in the cotton belt and by making a careful 
study of the laws governing warehousing in the southern states. It 
was not long in reaching the conclusion that the yield of cotton would 
be much less than was the case in 19 14. Finding the storage facilities 
for such portion of the crop as might have to be carried over generally 
adequate, it recommended the creation of a special kind of accommo- 
dation to assist those producers who, having made their crop, might 
desire temporarily to withhold a portion of it from market. The 
committee entertained the view that warehouse receipts for cotton, 
grain, and other staple, non-perishable agricultural products of a 
readily marketable character, form an excellent basis for bank loans, 
particularly as under the terms of the Federal Reserve Act and the 
regulations of the Board, notes thus secured are eligible for rediscount 
by Federal Reserve Banks. 

During the summer, the committee developed a method by which 
producers could secure low rates upon loans secured in this manner, 
and in order to encourage co-operation between member banks and 
producers, the Board issued on September 3, 191 5, its commodity 
paper regulation which provided that notes secured by non-perishable 
staple commodities, having a specified date of maturity, and upon 
which member banks had not charged a rate of interest, or discount, 
including all commissions, of more than 6 per cent per annum, should 
be eligible for rediscount in Federal Reserve Banks at a preferential 
rate. It should be especially noticed that this commodity rate, so 
called, was not confined to any section of the country or to loans 
secured by any one commodity, but was general in its nature. It 
applied not to cotton alone, but to other staple products, such as 
grain, sugar, and wool. It was, in fact, adopted by several of the 
reserve banks, some of them, however, receiving but little business 
under it owing to the abundance of funds in member banks. 

The Board, moreover, in the exercise of the powers conferred upon 
it by the Federal Reserve Act, was fully prepared to set in operation, 
if it should become necessary, at rates to be fixed by it, the machinery 
of interbank rediscounting, in order to make available for Federal 
Reserve Banks requiring larger resources the available funds of other 
reserve banks, the collective strength of the reserve system as a whole 
being far in excess of any demands that might reasonably be expected 
to be brought to bear upon it at that time. 

The Board's commodity paper regulation was issued September 3, 
191 5, well before the time when the movement of the cotton crop 



RURAL CREDITS 



761 



could be expected to give rise to drafts upon the southern banks, and 
it was some time, therefore, before any considerable number of appli- 
cations for loans at the commodity rate was made. During the month 
of November the southern reserve banks converted many of their 
loans into the commodity form. Such loans aggregated $10,300,000 
to the end of the year, $7,500,000 being the volume outstanding on 
December 30, 1915. 

The effect of the commodity paper regulation was mainly antici- 
patory and protective. The certain assurance that whatever funds 
might be necessary for the gradual and orderly marketing of the cotton 
crop would be available at moderate rates had an immediate and 
stimulating effect on sentiment. Other factors which contributed to 
the same result were the evidences of an early and active buying 
movement and the realization that the cotton yield would be much 
less than that of 19 14. Within 60 days, prices advanced from 8 cents 
to 12 cents per pound. There was a steady movement of the staple 
to primary markets, the price of cotton seed advanced to a figure that 
added from $20 to $25 a bale to the farmer's income, and compara- 
tively little cotton had to be carried by banks for producers. 

The fact that there has been no demand for inter-bank rediscounts, 
and that the autumn season has passed without the usual stringency 
due to the necessities of crop moving, point conclusively to the bene- 
fits derived from the Federal Reserve System. It is quite true, as 
has often been observed, that the great release of reserves under the 
Federal Reserve Act produced an unusual ease of money the country 
over. This general ease, however, would not of itself have solved the 
difficulty of crop moving, or have met the regularly recurring currency 
requirements of the various agricultural sections of the country. 

AMOUNTS OF COMMODITY PAPER DISCOUNTED BY EACH OF THE FEDERAL 
RESERVE BANKS FROM SEPTEMBER 8, DATE OF FIRST DISCOUNT, TO 
DECEMBER 31, 1915 
[In thousands of dollars) 



Federal Reserve Bank 


Commodity Paper Discounted during Month of 


September 


October 


November 


December 


Total 




96.0 
807.3 


364-4 

1,6572 

312 

i-5 

4-8 

35-7 


1,523.4 

2,739- 1 

15 

12.5 

83.7 

1.5 


897.6 

1,828.7 

53-6 

n. 3 

148.2 


2,881 .4 


Atlanta (including New Orleans branch) 


7.032.3 








Dallas 


23 






37-2 








Total 


905.6 


2,094.8 


4.375-2 


2,9394 


10,315.0 





* All discounted at regular rates. 



762 AGRICULTURAL ECONOMICS 

245. THE COMMODITY REGULATION OF THE FEDERAL 
RESERVE BOARD 1 

By W. P. G. HARDING 

Now, we all know that the farmer has temperamental peculiarities. 
We know, as a matter of fact, that the farmer has been accustomed 
in the fall of the year when his crop is made, either to dump it on the 
market voluntarily, or to have someone say to him that he must 
dump it to get the cash and pay his debts. We feel in Washington 
that it would be a great thing if the farmer could feel that there were 
special inducements offered him to do his part in this gradual market- 
ing movement. We thought of that when the Federal Reserve Board 
framed its commodity regulation. Now, we have talked with a num- 
ber of bankers from the South and we realize that they cannot loan 
money at 6 per cent as a general proposition. But we felt that an 
unusual occasion was presented to us, that here was a crop that had 
been produced and was ready for market and that the price was not 
as high as we thought it should be on its merits. We desired to 
put the southern bankers in a position where they could go to the 
southern farmer and say, "If you have your crop properly ware- 
housed, we want to loan you some money on this cotton so that you 
can pay your pressing debts and enable you to hold it until you 
can get such a price as we think is fair and equitable." Now the 
southern farmer, as a rule, would be reluctant to hpld his cotton if 
he had to pay 10 or 12 or 15 per cent interest to carry his cotton. 
Mark you, the crop has already been made; there is no risk attached 
to it — properly warehoused. The whole country is full of money: 
the bank reserves are greater than at any time in the history of 
the nation: no bank of any consequence, national or state, but is 
anxious to make loans. The federal reserve banks' resources are 
scarcely touched. So they issued the regulation to the effect that any 
bank who loans on warehouse receipts on cotton properly insured, at 
a rate of interest, including commission, not exceeding 6 per cent, 
should have the privilege of rediscounting with the federal reserve 
bank at a 3 per cent rate. There was no compulsion about that. 
Any bank which did not care to make that loan could demand the 
same loan under the commercial regulations at the rate of 4 per cent. 

1 From address at the Conference of Cotton States Bankers, New Orleans, 
December 6-7, 1915. Stenographic report of proceedings loaned by the secretary, 
Mr. Moorhead Wright. 



RURAL CREDITS 763 

But to get the benefit of the abnormal rate of 3 per cent, it had to 
certify that it had made this loan at a rate not exceeding 6 per cent. 
It gave the bankers an opportunity to co-operate in this movement 
by offering special inducements to the farmer to carry his cotton at 
6 per cent. This was the force of the commodity regulation. 



Note. — The text of the commodity regulation is as follows. — Editor. 



Circular No. 17 
Series of IQ15 

FEDERAL RESERVE BOARD 

Washington, September 3, 191 5 



commodity paper 

In Regulation B, series of 191 5, the Board has established the policy 
of encouraging transactions of Federal Reserve Banks in trade acceptances 
and in commodity paper by admitting these kinds of paper to be redis- 
counted by Federal Reserve Banks with the waiver of the particular require- 
ments with reference to statements. 

In pursuance of this policy, the Board has issued a regulation (P, series 
of 191 5) laying down the conditions under which trade acceptances may be 
discounted by Federal Reserve Banks at a special rate to be published for 
this kind of paper. In further pursuance of the same policy, the Board in 
the appended regulation (Q, series of 191 5) has authorized special rates on 
commodity paper. 

It is expected that this new class of paper with its special rates will 
prove of particular efficacy in meeting the seasonal demands for credit 
facilities in the crop-producing districts, and the Board in authorizing these 
special rates will rely on the Federal Reserve Banks to adopt a policy which 
will result in securing for the ultimate borrowers the extension of credit on 
moderate terms by member banks. As in the case of trade acceptances, 
the rates to be established for commodity paper may be expected to be 
lower than the rates established for ordinary commercial paper. It will 
be left to the discretion of the Federal Reserve Banks to determine whether 
different rates should be established for trade acceptances and commodity 
paper. Uniformity of rate may appear to be desirable in districts where 
here are transactions in both kinds of paper. 

Charles S. Hamlin, Governor 

H. Parker Willis, Secretary 



764 AGRICULTURAL ECONOMICS 

FEDERAL RESERVE BOARD 

Regulation Q 
Series of iqi$ 

Washington, September 3, 191 5 

COMMODITY PAPER 

In this regulation the term "commodity paper" is denned as a note, 
draft, or bill of exchange secured by warehouse terminal receipts, or ship- 
ping documents covering approved and readily marketable, nonperishable 
staples properly insured. 

Commodity paper, to be eligible for discount by a Federal Reserve 
Bank under section 13, at the special rates hereby authorized to be estab- 
lished for commodity paper below the usual commercial rates, must (a) com- 
ply with all the requirements of Regulation B, series of 191 5, paragraphs I 
and II, or with the requirements of Regulation C, series of 191 5; (b) and 
be paper on which the rate of interest or discount, including commission 
charged the maker, does not exceed 6 per cent per annum, and also (c) com- 
ply with such regulations as may be issued by Federal Reserve Banks cover- 
ing requirements as to warehouse or terminal receipts, shipping documents, 
insurance, etc., adapted to the particular needs of its district as a condition 
of the special rate herein authorized. 

Federal Reserve Banks are now authorized to submit rates for the dis- 
count of commodity paper in accord with this regulation for review by the 
Board. 

Charles S. Hamlin, Governor 

H. Parker Willis, Secretary. 

D. Criticism and Proposals for Reform 

246. THE AGRICULTURAL CREDIT SYSTEM OF GERMANY 1 
By LE ROY HODGES 

Rural banks were first established in Germany by RaifTeisen in 
1862, and on June 1, 19 10, less than fifty years later, there were 
15,517 legally established institutions in the empire. 

The members of the Raiffeisen banks are farmers, usually peasant 
proprietors. The number of members per bank varies considerably, 
although, taking the banks under the National Federation as a whole, 
92 members per bank is a fair average. Under the constitution of 
the banks a minimum membership of seven is required. Some of the 
recently organized banks have exactly this number of members. The 
highest number of members reported for any one bank is 1 ,400, which 
is a very exceptional case. 

1 Adapted from House Document No. 1435, 62d Cong., 3d sess., pp. 10-34. 



RURAL CREDITS 765 

Raiffeisen established his banks on the fundamental principle of 
unlimited joint and several liability of the members. Unlimited lia- 
bility is still regarded in Germany as the system best adapted to rural 
co-operative credit, while for other forms of rural co-operation limited 
liability is being more generally adopted. 

In order to avoid any danger of capitalistic speculation, Raiffeisen 
excluded shares altogether from his banks, but in 1876 he was obliged 
to comply with the imperial law which compelled co-operative 
societies to have foundation capital, and fixed the shares at a maxi- 
mum value of 10 marks (about $2 .40). The Darmstadt federation, 
on the other hand, recommended comparatively large shares, but not 
to exceed 500 marks (about $120). In very few cases, however, does 
the value of the share exceed 100 marks (about $24). 

In societies where the liability is unlimited a member cannot take 
more than one share; in societies with limited liability, however, he 
may take more. The value of the shares, and, in the latter case, also 
their number, are fixed by the rules. The shares are repayable to 
the members upon withdrawal from the society, and interest is paid 
upon them at a rate which must not in any case exceed the interest 
which borrowers pay upon loans from the society. 

The pure Raiffeisen system does not admit of entrance fees, 
although the Darmstadt federation allows small fees which are carried 
immediately to the reserve fund. Another fundamental principle of 
the Raiffeisen system is that the area of operations is limited to a 
commune or a parish. The organization of the rural banks being, 
therefore, familiar and friendly, so to speak, their management is very 
simple. The administrative functions are divided between the com- 
mittee of management, the council of supervision, and the general 
meeting. The executive work is carried out by the treasurer, who is 
often the only employee of the bank, and in any case is responsible 
for the work of the other employees. 

The general meeting appoints the committee of management, the 
council of supervision, and the treasurer. The conduct of the business 
is intrusted to the committee of management, upon which often sit 
the best educated persons of the district, such as the schoolmasters or 
priests; for these, however, farmers are being more and more sub- 
stituted. 

The committee of management usually give their services gratui- 
tously. This, too, is one of the principles of pure Raiffeisenism, 
which, however, permits in any case the remuneration of the treasurer. 



766 AGRICULTURAL ECONOMICS 

The Darmstadt federation allows the committeemen to be paid for 
their services when the business of the bank is fairly large. 

In 1909, for instance, the expenses of management amounted, on 
an average, to the modest sum of 638 marks (about $153 . 12) per bank. 

The capital which the rural banks have at their disposal for making 
loans to members is composed of the shares paid up by the members, 
the reserve fund accumulated in previous years, the savings deposits, 
and deposits on current account, and the sums which they procure 
by means of loans from the central co-operative banks, other banks, 
or private individuals. Current accounts and savings deposits fur- 
nish 85 per cent of the total working capital, while about n per cent 
is drawn from the outside sources, such as the central co-operative 
banks, other banking institutions, and the general public. 

Savings deposits may be made either by members or by non- 
members, but deposits on current account can only be made by 
members. 

Making advances to members is the principal business of the rural 
banks. Surplus money is deposited with the central banks or invested 
in banking operations with third parties. Loans consist of two kinds: 
first, loans one urrent account; and second, loans for fixed periods. 
The loans on current account compose about a third of the total loans of 
the German rural banks, and there is a tendency to extend the practice. 

The members guarantee the fulfilment of their obligations to the 
bank by finding sureties, by the deposit of valuables — such as share 
certificates, etc. — by giving a mortgage, or by their mere promise. 
The finding of sureties is the form of security usually preferred . The 
period of loans varies from six months to two years or three years, 
and even more in exceptional cases. 

The principal safeguard for the success of the rural banks lies in 
their very constitution. The limited area of operations and the 
nature of rural life make it possible for each member to keep an eye 
upon the affairs of his fellow-members in which, moreover, he is 
directly interested, so that he can easily judge at any moment of their 
solvency and of the manner in which they are utilizing the money 
obtained from the bank. 

The object of the rural banks is to give credit to the members on 
favorable terms and not to make a commercial profit. The Raiff eisen 
system, accordingly, does not admit of any distribution of dividend, 
all the profits realized being carried to the reserve fund or to the 
creation of institutions of public utility. The Darmstadt federation, 



RURAL CREDITS 767 

on the other hand, allows a distribution of dividend on the shares, 
which, however, must not exceed the maximum rate of interest 
charged to borrowers. 

In 1909 the net profit realized by the, rural banks was more than 
7,000,000 marks. This is sufficient evidence of the flourishing con- 
dition of these institutions. Of this enormous profit only a small 
fraction was distributed as dividend. In this manner the banks are 
continually strengthening their financial position. This is demon- 
strated by the steady increase of the reserve funds. In a single year, 
from 1908 to 1909, the aggregate reserve fund was increased by 
7,000,000 marks, while the profits realized at the end of 1908 were 
about 8,000,000 marks. Thus seven-eighths of the profits made in 
that year were carried to the reserve. 

Agricultural credit is furnished in Germany by the Schulze- 
Delitzsch co-operative banks, usually spoken of as the "popular" or 
"urban" banks, as well as by the purely rural banks under the 
Raiffeisen system. Notwithstanding the great development of the 
rural banks, many farmers still utilize the Schulze-Delitzsch banks. 
In fact, about 28 per cent of the membership of these banks is com- 
posed of farmers and farm laborers. 

The Schulze-Delitzsch banks have, therefore, unlike the rural 
banks, a large range of business in an extended area of operations; 
they accumulate a considerable quantity of capital and they distribute 
fairly high dividends. They do not follow the principle of unpaid 
management ; on the contrary, their management is rather costly and 
is conducted on strict business lines. They are very often based on 
limited liability, and they carry on a series of banking operations 
which the rural banks seldom undertake. Their business is modeled, 
more closely than the rural banks, upon the plan of banks doing a 
purely commercial banking business. 

In addition to the co-operative banks under the Raiffeisen and 
Schulze-Delitzsch systems, Germany has another very characteristic 
form of co-operative credit, commonly spoken of as the landschaften, 
usually organized for a whole Province. There are about 25 institu- 
tions now existing under this system, principally in Prussia. Their 
object is to obtain for their members the credit required for land 
improvements by means of bonds guaranteed by the landowners of 
the province collectively. The landschaften societies furnished 
German agriculture in 1909 with more than $840,000,000 of loans on 
mortgages at rates of interest not exceeding 4 per cent. 



768 AGRICULTURAL ECONOMICS 

The constitutions of the landschaf ten vary considerably from each 
other, being adapted to the special needs of their respective provinces. 
All, however, have a committee of management and a general assembly 
of landowners. Members of the committee of management having 
legal training, the syndics, as they are called, receive pay. The other 
members of this committee and of the general assembly are land- 
owners, who receive only their traveling and incidental expenses. 

The total number of landlords of a district collectively grant a loan 
to the proprietor applying for it. The purpose to which the loan is to 
be applied must be stated in detail in the application. No proprietor 
can be refused a loan, as his land serves as security to the landschaf t. 

Loans are not granted exceeding a certain percentage of the value 
of the lands, varying with the different provinces and according to 
the methods employed in fixing the rate of interest. The body of 
landlords, although they possess real estate of enormous value, seldom 
have cash money at their disposal and are forced to get from third 
parties the money needed for loans to the borrowing landowners. 
They have recourse indirectly to the capitalist as a means of getting 
this money, offering their lands as a medium of investment. 

In order to render the negotiation of this paper easier for the 
lenders, special banks have been instituted in connection with the land- 
schaften dealing with this business, under the control of the society 
itself and without any intention of making a profit. The profits 
go to the landschaf t as such. Formerly it was mortgaged land 
that served as security under a secondary security of the landschaft. 
Today the capitalist who has bought the bonds and is the creditor 
of the borrowing landowner has nothing to do with him. He receives 
his interest from the landschaft and the whole of the estate of the 
province forms his security. 

At first most of the landschaften only gave mortgages for one- 
half of the estimated value. Now they generally go as far as to give 
them for two-thirds of the value. Land already burdened with 
other mortgages cannot receive any loan from the society. The land- 
schaften, however, help proprietors when, in order to obtain a loan, 
they desire to pay off previous mortgages. 

Except in the case of the three institutions of Hanover, the loans 
are not granted in money, but in bonds. 

The interest the debtor must pay the landschaft is generally from 
one-half to i per cent higher than what the landschaft itself pays its 
creditors. 



RURAL CREDITS 769 

The difference serves to cover the expenses of administration, to 
constitute special funds created in the interest of all the members of 
the society, as well as for the creation of reserve funds and for the 
gradual extinction of the debt. The landschaft generally renounces 
its right of calling up the money it lends, but the debtor can always 
repay the money borrowed. Generally this repayment takes place 
by gradual extinction, which is often even obligatory for a certain 
proportion of the debt. The sums so repaid must be considered at 
the same time as reserves in case of possible losses to be incurred. 

The public readily accepts the bonds of the landschaften, although 
the rate of interest is often as low as 3J per cent. The bonds have 
also always been well received on the national market, and in order 
to open an international market for them certain landschaften in 1873, 
with the permission of the government, founded a central landschaft 
for the Prussian provinces with headquarters at Berlin. The land- 
schaften that now form part of this union are allowed to issue pro- 
vincial bonds and also bonds of the central landschaft. In issuing 
these last, however, they are bound to observe certain rules as to the 
methods of valuing the lands. 

The bonds of the central landschaft are well received on the 
exchanges, where they have almost the same standing as the Imperial 
and Prussian bonds. 

247. CAN CO-OPERATION REMEDY RURAL CREDIT 

CONDITIONS P 1 

By LEWIS H. HANEY 

When we come to examine the chances for successful personal 
credit associations in Texas, it seems that the negro population must 
be left out of consideration for the present. In most parts of the state 
the negro would be excluded from organizations of whites, and it is 
more than doubtful if negro credit associations could succeed. Also, a 
part of the poor white farmers are beyond the reach of co-operation on 
account of their migratory habits and thriftlessness. It is the writer's 
well-considered opinion that fully 10 per cent of the white tenant 
farmers of Texas are hopeless — cannot get good credit by any means. 

Some of the adverse conditions affecting the majority of the 
whites are as follows: (1) There is a large element classed as "poor 
whites," a shifting and shiftless group; 5 per cent of the native white 

1 Adapted from the American Economic Review, IV, No. 1 (March, 1914), 
61-66. 



770 AGRICULTURAL ECONOMICS 

males in the rural population are illiterate, and 31 per cent of the 
foreign-born white males; while only 44 per cent of the native white 
rural children are attending school. (2) These people are largely 
short- time tenants. (3) The one-year lease is almost universal, and 
under it tenants commonly are migratory and take no interest in 
scientific farming. So shifting a population is seriously handicapped 
in developing that mutual acquaintance and trust which may come 
in more stable groups. (4) It follows that farmers are deficient in 
disposition and training for team work and do not easily pull together 
as co-operation requires. (5) Finally, a speculative spirit pervades 
even farming operations and is opposed to the spirit of frugal saving 
which must attend the successful operation of credit unions. 

Many native Texans are not efficient farmers, a fact which is 
clearly demonstrated by comparison with German and Bohemian 
farmers who occupy certain sections of the state. The foreigners get 
a far larger return per acre, while at the same time maintaining the 
fertility of their land. As a result, they find no difficulty in getting 
credit when they need it, though, as a matter of fact, they borrow far 
less frequently than the native farmers. There can be no question 
that the introduction of better farming methods is much needed as 
a basis for better farm credit. 

The strongest argument in favor of personal credit co-operation, 
however, is probably the educative value of co-operation itself.- 
Efforts in co-operation increase the facility of co-operating. The 
object of successful credit organization must be to improve such non- 
transferable productive powers as poor men can possess — strength, 
skill, energy, and honesty — and to organize and direct them so that 
they may be used as a basis of credit ; and to this basis it may add by 
making more readily negotiable the small property possessed which 
is not now accepted as security on favorable terms. Of course, there 
must be a modicum of the qualities just mentioned to start with. 

Stated comprehensively, what co-operation can accomplish in 
states like Texas is as follows : First, it can reduce the risks of lending 
in at least six ways. (1) The integrity of the co-operative group can 
be raised above the average of the class concerned by a selective 
process. To this end, the area embraced in a single group should be 
limited, and good standing among neighbors and acquaintances be 
made a condition of membership. (2) The interests of the immediate 
borrowers and lenders are harmonized. This is accomplished through 
the fact that the capital of the co-operative unit is largely drawn from 



RURAL CREDITS 771 

the entrance fees and deposits of farmer members. (3) The credit of 
individual members is pooled, thereby increasing the borrowing power 
of each. The pooling is the result of a collective guaranty of loans 
made to any member, and its effectiveness increases with the extent 
to which the collective guaranty increases, being at a maximum under 
unlimited liability. (4) The security of loans can be increased by 
careful and intelligent scrutiny of the purposes of the borrower in 
order to insure against loans for unproductive purposes. And, of 
course, this feature can be strengthened by inspection to see that sums 
borrowed are applied for the purpose specified. (5) By means of 
local supervision the most productive methods of applying loans can 
be secured and more skilful farming be encouraged. (6) Finally, the 
security that farmers have to give can be made more liquid and 
negotiable. To be concrete, land and cotton are not welcomed by 
our commercial banks as bases of credit; but by co-operating and 
pooling such resources and making them the basis of issues of equal, 
transferable securities of convenient denomination, a ready loan 
market may be created. Clearly, points 1,2, and 3 insure improve- 
ments in integrity, or will to pay; and points 3, 4, 5, and 6 insure 
greater solvency, or ability to pay. These are the very bases of credit. 

In addition to the preceding means of reducing risk, it is to be 
remembered that economy in direction and management of the credit 
business can be gained by co-operation. By confining operations 
rigidly to securing credit, and working through small local units, the 
simplest and cheapest organization is secured. A single central 
organization can serve as a clearing house for a large area. 

The greatest need is working capital with which to make crops, 
with a less immediately urgent need of farm animals. This need 
exists more urgently among a large mass of poor tenant farmers. 
Therefore, the most desirable credit agency is one which can best 
supplement existing agencies in developing such credit as these 
farmers have. These facts indicate an organization of the personal 
credit type, confined to as small areas as is practicable, and operating 
with a liability that is greater than that of corporation stockholders. 
The object of co-operative credit is not so much to increase directly 
the money security as to improve integrity and, indirectly, income and 
ability to pay. 

Recognition of the local situation, however, would seem to indicate 
some modification of the personal credit idea in making loans lo mem- 
bers, temporarily, at least. The chattel and crop mortgage system 



772 AGRICULTURAL ECONOMICS 

is well developed and thoroughly understood, and the existing banking 
machinery is adjusted to it. It does not lock the money up for too 
long a time, as is the case with land; and the security if seized is more 
readily salable. Close local supervision by interested fellow members 
would insure the best care for cattle, crops, etc. A use of the chattel 
mortgage would facilitate the securing of funds from commercial 
banks. Say there are twenty-five members, each of whom borrows 
$300; their aggregate notes secured by chattel mortgage amount to 
$7,500. Instead of going to the storekeeper, who now acts as credit 
middleman between bank and farms (at a rate of over 20 per cent), 
these twenty-five farmers give their notes to their credit unions, which 
deal with the bank for them. With unlimited liability, which we are 
supposing, it is likely that a bank would lend the association the full 
$7,500 at the lowest commercial rate of interest — and angels could 
do no more. Even if limited liability prevailed, the association 
would merely make its note for enough less than $7,500 of mortgages 
to allow a safe margin, and so, by risking $7,500 for, say $6,000, the 
lowest rates might be secured. 

Such utilization of chattel mortgage security would make it pos- 
sible to gain the most from existing banking agencies, which is highly 
desirable. The country banks of Texas at present extend a wide 
range of service to farmers and desire their business. The best atti- 
tude to take toward co-operative associations is to regard them as 
feeders for commercial banks. The great source of funds is the same 
under any credit system. What co-operative organization should seek 
is to become an effective credit middleman between latent or ill-used bases 
of credit among farmers and the funds held in commercial banks. To 
replace the storekeeper in the existing system would be a large part 
of its service. 

248. THE GOVERNMENT MUST GIVE DIRECT ASSISTANCE 1 
By SAMUEL M. TAYLOR 

Aid to enable farmers to procure money to purchase homes and 
to carry on agricultural pursuits has been extended by every enlight- 
ened government save our own. We have extended governmental 
aid in one form or another to every line of business except agriculture. 
Millions of acres of public lands were given away to corporations to 

1 Adapted from extension of remarks in the Congressional Record, 64th Cong., 
1 st sess., pp. 3468-69 (February 21, 19 16). 



RURAL CREDITS 773 

induce them to build railroads. In the past this government has 
subsidized shipping lines to carry mail; guaranteed the contract of 
the bankers in order to enable them to realize on their paper; we 
have agents in every part of the world developing business for our 
merchants and manufacturers, but we have left our farmers to the 
tender mercies of great mortgage and loan companies, who charge 
ruinous interest rates. We have disregarded the fact that the cost 
of production necessarily must enter into the cost of the product to the 
consumer, and therefore have contended that any aid extended to 
the farmer was class legislation. Yet we must realize with emphasis 
that everything that is eaten and worn must be the product of his 
toil, and its cost to the consumer necessarily influenced by the cost 
of production. This being granted, direct federal aid to the farmer 
will be as helpful to all other classes as to him, because to the consumer 
the cost of living would be cheapened and all classes would benefit 
by the legislation equally, and there would be, therefore, no class 
legislation. However, the sharp line of division between those who 
really want to enact helpful legislation that is really helpful to cor- 
porations and groups of men of great wealth and hurtful to the farmer 
divide upon this one question of government aid. With it the farmer 
will be emancipated. Without it he will have to begin over again 
his fight for justice. 

If legislation is enacted at this Congress, as proposed by some, 
without any aid being extended by the government, the farmer will 
reject it. He will realize it was not intended to help him, but merely 
to silence him; that instead of lifting his burdens, it will grant a 
respite to those who are oppressing him. It will postpone the day 
of justice, because, when he complains, he will be answered that "we 
have legislated in your behalf, and you have not as yet had time to 
determine whether it will be helpful or not and you must wait." 

It is strange that the idea is advanced always that the govern- 
ment must not come to the relief of one class when the farmer is 
being considered, yet all other classes are embraced in legislation 
directly intended to benefit that class. No one objected to govern- 
ment aid as applied to commerce and manufacturing enterprises. 
No one protested when appropriations were made to search out mar- 
kets. No one now seriously questions the wisdom of purchasing 
ships to transport commercial commodities to markets where they 
may be profitably disposed of. No one seriously objects when millions 
of dollars are expended to deepen harbors as places of refuge that 



774 AGRICULTURAL ECONOMICS 

commerce might be safely and cheaply handled; but the instant 
that legislation is proposed that will unshackle the farmers and make 
it possible for the tenants to become owners of farms, we are met with 
a protest that the proposed legislation is class legislation, is uncon- 
stitutional, and is contrary to the genius of our government. I take 
it that not for long will this great and deserving class of citizens 
submit to this unjust and unpartriotic treatment at the hands of its 
legislative body. The farmer demands less at the hands of his govern- 
ment and receives infinitely less than any other class of citizens. His 
occupation in a measure isolates him. It teaches him to rely upon 
his own resources; to meet and solve his own difficulties; to fight his 
own battles, and to do that single handed and alone. Therefore, he 
has never banded himself together, as other classes in this Republic 
have, and beseeched in one voice in the halls of legislation that justice 
might be done, and accordingly he has received nothing but faint 
praise and much exploitation. 

In the Sixty-third Congress there was an opportunity to have 
lifted from the farmers the burden they should not have borne in the 
way of exorbitant interest rates. I supported this bill, but the efforts 
of those who should have been the friends of the farmers were frittered 
away in support of measures, some of which were good and some 
wholly vicious, and each man wedded to his own idol, while those 
opposed to legislation by lining up first with one group and then the 
other to fight all measures defeated all measures. Whether the same 
methods are to be pursued in this Congress is not yet apparent. 
There are measures pending in Congress, some of those the same bills 
that were introduced in the Sixty-third Congress, that if enacted into 
law, or the principles engrafted upon the committee bill, would procure 
for the farmer the full measure of relief that he is entitled to receive, 
and we who are his friends in Congress are pledged that no legislation 
not bearing these provisions shall be enacted into law by a vote of ours 
nor shall they be enacted into law without our protest. 

The present Congress and our great President are about to redeem 
the promise made at Baltimore in the new declaration of human rights. 
Under the provisions of the present committee bill as it is being re- 
drafted, and amendments added thereto, farmers will be enabled to 
borrow money on a long-time repayment plan at a rate of interest 
not in excess of 6 per cent, and possibly not greater than 5 per cent. 
There are many provisions in this bill that my judgment does not 
approve; however, in the main it stands for those things for which 



RURAL CREDITS 775 

the friends of rural credits have contended, and I stand with them. 
It commits the government in a measure to aid this system. When 
we have enacted it into law, and I believe we will, great relief will 
come to the farmer — no such sufficient relief, however, as in my 
judgment he is entitled to receive, but the best that can be had under 
existing circumstances. In fighting for this measure, as I shall do, 
and in advocating its passage, as I will do, I do not mean thereby to 
say that the farmers have received under this bill all they are entitled 
to receive at the hands of this government. I do not mean thereby 
to say that I shall accept it as a just and adequate relief. On the 
other hand, I intend that this shall be merely a stepping stone, a 
beginning, a new starting point, in the fight that we are now waging 
to give justice to this most deserving class of our citizenry. 

249. STATE AID UNNECESSARY 1 
By MYRON T. HERRICK 

Unfortunately the rural credits movement has been rived by a 
serious cleavage, and on one side stand those who insist upon state 
aid, and on the opposite side stand those who believe in private 
initiative and co-operation. The demand for state aid in farm mort- 
gaging is very strong, and the tendency in that direction was exceed- 
ingly pronounced in the last Congress. Practically all the measures 
introduced provided for it to a greater or less extent, while those that 
received the most attention proposed its use for farmers generally to 
a degree that appears in Europe only for the lowest class of peasants. 
About one-half billion dollars was demanded for cotton-growers, 
while cheap money without limit through government intervention 
was demanded for farm mortgaging. The advocates of state aid cite 
as their arguments this use of state aid in some European countries, 
the critical situation arising from the Great War, and the indifferent 
or alleged antagonistic attitude of financiers toward farmers. On the 
other hand, the friends of private initiative and co-operation assert 
that conditions in Europe and the United States are dissimilar and 
that there is no emergency here calling for the use of government 
cash or credit. They cite as their arguments the official declarations 
of President Wilson, Secretary Houston, the United States and 
American commissions, and other experts against state aid, and they 

1 Adapted from an address delivered at the Panama-Pacific International 
Exposition, San Francisco, September 21, 1915. 



776 AGRICULTURAL ECONOMICS 

contend that if proper legislation were enacted and rural co-operative 
organization perfected, the credit of landowners and the resources of 
farmers would be so vitalized that abundant capital would be avail- 
able on easy terms for the cultivation of the soil and the continual 
advancement of agriculture. 

The strongest argument for state aid is the claim that there is a 
pressing, immediate necessity for it; if that claim is wrong, or if 
any necessity that exists should disappear, then the demands for 
state aid ought to cease with it. State aid — after saying the most 
that can be said for it — is merely an expedient to meet an exigency, 
the existence of which is as stoutly denied by some people as it is 
asserted by others. Furthermore, it is advocated without fully 
considering its effect on the taxpayers not intended to be directly 
benefited, and without a thought of testing and letting the ordinary 
means of farm finance have a chance to show their worth. 

The arguments for state aid are based on premises, the correctness 
of which can be logically proved, of course, only by future trial. In 
my opinion there is not one advocate of it but believes in his heart 
that the injustices he condemns and the troubles he mentions would 
be remedied, if private enterprise could be efficiently regulated and 
rural co-operation intelligently practiced. So in studying the ques- 
tion, we must consider the possibility of making these latter methods 
effective. They are more effective in Europe than the much heralded 
state aid and are more generally used than it. They rest upon 
individual honesty and capability. No one in this hall will maintain 
the superiority of European over American people in these two 
qualities. Indeed, we all think that the comparison runs in our 
favor; so if we should say, in spite of the wonderful agricultural 
organizations developed through private enterprise and co-operation 
in Europe, that such development is impossible here, the assertion is 
tantamount to an admission of inferiority, or an absurdly illogical 
deduction that American financiers and farmers cannot do what 
lesser peoples in Europe have accomplished to a remarkable degree 
of success. 

E. State and Federal Legislation 

250. CREDIT UNIONS IN MASSACHUSETTS 1 

Under a law approved May 20, 19 15, Massachusetts, which had 
already made some beginnings toward co-operative credit in the 
cities, undertook to give the system a wider field of usefulness in the 

1 Chap. 268, General Acts of 1915, Commonwealth of Massachusetts. 



RURAL CREDITS 777 

rural districts. Seven or more residents of the commonwealth are 
given the right to associate themselves together for such purposes. 
The character of the business is indicated by the following extracts 
from the law: 

Section 5. A credit union may receive the savings of its members in 
payment for shares or on deposit; may lend to its members at reasonable 
rates, or invest, as hereinafter provided, the funds so accumulated; and 
may undertake such other activities relating to the purpose of the associa- 
tion, as its by-laws may authorize 

Sec. 7. No credit union shall receive deposits or payments on account 
of shares, or make any loans, until its by-laws have been approved in writing 
by the bank commissioner, nor shall any amendments to its by-laws become 
operative until they have so been approved. 

Sec. 8. All property of a credit union, except real estate, and all capi- 
tal stock in a credit union shall be exempt from state and local taxation, 
except legacy and succession taxes. 

Sec 9. The capital of a credit union shall be unlimited in amount. 
Shares of capital stock may be subscribed for and paid in such manner as 
the by-laws shall prescribe, except that the par value of shares shall not 
exceed ten dollars. 

Sec. 10. Shares may be issued and deposits received in the name of 
a minor 

Sec 11. The capital, deposits and surplus funds of a credit union shall 
be invested in loans to members with the approval of the credit committee 
as provided in section seventeen of this act, and any capital, deposits, or 
surplus funds in excess of the amount for which loans shall be approved by 
the credit committee may be deposited in savings banks or trust companies 
incorporated under the laws of this commonwealth, or in national banks 
located therein, or may be invested in the bonds of any other credit unions 
or any farmland bank incorporated under the laws of this commonwealth 
or in any securities which are at the time of their purchase legal investments 
for savings banks in this commonwealth, or, with the approval of the bank 
commissioner, may be deposited in other credit unions or may be invested 
in the shares of other credit unions or of farmland banks or co-operative 
banks incorporated under the laws of this commonwealth: provided, that 
the total amount invested in the shares of other credit unions, farmland 
banks or co-operative banks shall not exceed 30 per cent of the capital and 
surplus, and that not more than 20 per cent shall be invested in the shares 
of other credit unions, nor more than 20 per cent in farmland bank shares. 
nor more than 20 per cent in co-operative bank shares. 

Sec 13. (Annual and special meetings) .... No member shall be 
entitled to vote by proxy or to have more than one vote, and, after a credit 
union has been incorporated one year, no member thereof shall be entitled 
to vote until he has been a member for more than three months. 



778 AGRICULTURAL ECONOMICS 

The members at each annual meeting shall fix the amount of the 
entrance fee for the ensuing year, which may be made proportional to the 
number of shares issued to a member, the maximum amount to be loaned 
any one member, and, upon recommendation of the board of directors, may 
declare dividends in accordance with the provisions of section twenty -two 
of this act. 

Sec. 17. The credit committee shall hold meetings, of which due 
notice shall be given to its members, for the purpose of considering applica- 
tions for loans, and no loan shall be made unless all members of the com- 
mittee who are present when the application is considered, and at least 
two-thirds of all the members of the committee, approve the loan and are 
satisfied that it promises to benefit the borrower. All applications for loans 
shall be made in writing and shall state the purpose for which the loan is 
desired and the security offered. 

Sec. 18. Loans upon the security of first mortgages upon farm lands 
shall in no case exceed in amount 50 per cent of the value of the property 
pledged as security, and shall be for the following purposes only: (a) the 
clearing, draining, or otherwise reclaiming and permanently improving 
agricultural lands; (b) the providing of facilities for irrigation; (c) the 
planting and early care of orchards; (d) the erection of silos, cold storage 
plants, greenhouses, and permanent farm buildings; (e) the purchase of 
farms and farm lands for personal occupation and management; (J) the dis- 
charge of existing farm mortgages; and, (g) subject to the approval of the 
bank commissioner, such other improvements of a permanent nature as, in 
the opinion of the directors, tend to develop agricultural resources. The 
mortgage deeds securing such loans shall contain a provision for immediate 
foreclosure if the money lent is applied in whole or in part to purposes not 
hereby authorized, or if, in the opinion of the directors, it is being spent 
unwisely or wastefully. 

A credit union may, with the approval of the bank commissioner, by 
vote of its board of directors, issue, sell, and trade in its own collateral trust 
bonds, which shall be known and described as farmland bonds and shall be 
secured as hereinafter provided by the deposit of first mortgage notes on 
farm lands and the mortgages securing the same. In case of failure of a 
credit union to pay the interest upon its bonds or the principal when due, 
the bonds shall be an underlying lien on all its assets and the bank com- 
missioner shall forthwith take possession of the assets and wind up the 
affairs of the corporation. Loans on the security of first mortgages on 
farm lands shall be made, and bonds of credit unions secured thereby shall 
be issued, in accordance with the provisions of chapter two hundred and 
thirty-one of the General Acts of the current year relating to farmland 
mortgages and farmland bonds, and any acts in amendment thereof or in 
addition thereto, so far as applicable. 



RURAL CREDITS 779 

Sec. 19. No member of the board of directors or of either the credit 
or supervisory committee shall receive any compensation for his services as 
a member of the said board or of such committee, nor shall any member of 
the credit or supervisory committee, directly or indirectly, borrow from the 
corporation or become surety for any loan or advance made by it. 

No member of the board of directors shall, directly or indirectly, borrow 
from the corporation or become surety for any loan or advance made by it, 
unless such loan or advance shall have been approved at a meeting of the 
members of the credit union by a majority vote of those present, and the 
notice of such meeting shall have stated that the question of loans to 
directors would be considered at such meeting. 

The officers elected by the board of directors may receive such com- 
pensation as the board shall authorize. 

Sec. 20. Before the payment of an annual dividend in any year, there 
shall be set apart as a guaranty fund 20 per cent of the net income which 
has accumulated during the fiscal year, except as hereinafter provided. 
Said fund and the investments thereof shall belong to the corporation and 
shall be held to meet contingencies or losses in its business. All entrance 
fees shall be added at once to the guaranty fund. Upon recommendation 
of the board of directors, the members at any annual meeting may increase, 
and, whenever said fund equals or exceeds the amount of capital stock 
actually paid in, may decrease, the proportion of profits which is required 
by this section to be set apart as a guaranty fund : provided, that, if the 
corporation holds stock in other credit unions or in farmland banks, the 
percentage of profits to be set apart as a guaranty fund shall not be decreased 
until the amount of the fund equals or exceeds the amount of capital stock 
of the corporation actually paid in and in addition thereto the amount 
actually paid for the shares of stock in such credit unions and farmland 
banks. 

Sec. 22. At the annual meeting, a dividend may be declared from 
income which has been actually collected during the fiscal year next preced- 
ing and which remains after the deduction of all expenses, losses, interest 
on deposits, and the amount required to be set apart as a guaranty fund, 
or such dividend may be declared in whole or in part from undivided earn- 
ings of preceding years, not to exceed 20 per cent thereof in any one year, 
provided such earnings are a part of the surplus of the corporation in excess 
of all requirements of the guaranty fund. 

Sec. 23. Within twenty days after the last business day of October 
in each year, every credit union shall make to the bank commissioner a 
report in such form as he may prescribe, signed by the president, treasurer, 
and a majority of the supervisory committee, who shall certify and make 
oath that the report is correct according to their best knowledge and belief. 
Any credit union which neglects to make the said report within the time 



780 AGRICULTURAL ECONOMICS 

herein prescribed shall forfeit to the commonwealth five dollars for each 
day during which such neglect continues. 

Sec. 24. The board of directors shall expel from a credit union any 
member who has not carried out his engagements with the credit union, 
or who has been convicted of a criminal offense, or who neglects or refuses 
to comply with the provisions of this act or of the by-laws, or whose private 
life is a source of scandal, or who habitually neglects to pay his debts, or 
who shall become insolvent or bankrupt, or who shall have deceived the 
corporation or any committee thereof with regard to the use of borrowed 
money; but no member shall so be expelled until he has been informed in 
writing of the charges against him, and an opportunity has been given to 
him, after reasonable notice, to be heard thereon. 

The amounts paid in on shares or deposited by members who have 
withdrawn or have been expelled shall be paid to them, in the order of 
withdrawal or expulsion, but only as funds therefor become available and 
after deducting any amounts due by such members to the credit union. 

251. THE LENDING OF STATE FUNDS IN OKLAHOMA 1 

An Act to encourage and promote home ownership in Oklahoma; providing for 
the investment of certain designated funds; authorizing the sale of bonds 
against the securities taken, and the re-investment of the proceeds 

Be It Enacted by the People of the State of Oklahoma: 

Section i. The Commissioners of the Land Office are hereby 
authorized and instructed to invest all monies now on hand or that 
may hereafter be received from the sale of lands commonly known as 
"State Educational Institution Lands" (same being section 13 or 
lands taken in lieu thereof), and the "New College Lands," in first 
mortgage on improved farm land in this State under such rules and 
regulations as may be provided by said Commissioners of the Land 
Office not in conflict with the following : 

(a) Not to exceed Two Thousand ($2,000) Dollars shall be loaned 
to any one individual or family. 

(b) All loans shall be secured by first mortgage on farm lands 
upon which the borrower resides, and holds as his homestead, and 
the cash value of which, disregarding all improvements, is at least 
double the amount of the loan. 

(c) Notes shall be drawn to run for twenty-three and one-half 
years — payment of 4 per cent of the full face value of each note to 
be made semi-annually; at each payment, interest $X the rate of 6 

1 Session Laws'of Oklahoma, 1915. 



RURAL CREDITS 781 

per cent, per annum upon the unpaid balance of such note to be 
deducted from the amount paid and the remainder to be credited 
upon the principal of the loan. 

(d) Loans from said fund, shall be made only for the following 
purposes: 

First: To assist the borrower to pay for a home. 

Second: To pay off an existing mortgage upon the home. 

Third: To make permanent improvement upon the home farm; 
Provided, that if such investments as hereinbefore provided are not 
reasonably available, then such funds may be invested in other 
securities authorized by the constitution. 

Sec. 2. For the purpose of supplying additional funds for the 
loans herein authorized to be made, the Commissioners of the 
Land Office are hereby authorized to sell, for not less than par 
and accrued interest, all or any portion of the notes and security 
therefor taken for the sale price, or unpaid portion thereof, of any 
of the land above referred to; such sale to be absolute and without 
recourse. 

The said Commissioners are further authorized to issue and sell, 
at not less than par value, bonds drawing not to exceed 5 per cent 
per annum interest, payable semi-annually, and to pledge for the 
payment of the principal and interest on same the notes and security 
therefor, taken for the sale price, or unpaid portion thereof, of any 
of the lands above referred to; provided, the amount of the bonds so 
issued, sold, and outstanding shall not at any time exceed 75 per cent 
of the face value of the unpaid portion of the principal of such 
notes. 

The said Commissioners are further authorized to issue and sell, 
at not less than par value, bonds drawing not to exceed 5 per cent 
per annum interest, payable semi-annually, and to pledge for the 
payment of same, principal and interest, all notes and mortgages 
taken for loans from said funds; provided, that the amount of the 
bonds so issued, sold, and outstanding, shall not at any time exceed 
90 per cent of the face value of the unpaid portion of the principal 
of such notes. 

Sec. 3. The bonds herein authorized to be issued, shall be 
designated as " Oklahoma Home Ownership Bonds," shall be in 
denominations of Twenty-five ($25.00) Dollars, One Hundred 
($100.00) Dollars, Five Hundred ($500.00) Dollars, and One Thousand 
($1,000.00) Dollars, and shall not be subject to ad valorem tax, 



782 AGRICULTURAL ECONOMICS 

but the income from such bonds shall be taxable under the income 
tax law. 

Sec. 4. Each series of the bonds so issued and sold, shall be made 
payable, 10 per cent in four years from the date of the issue, 10 per 
cent in eight years, 10 per cent in eleven years, 10 per cent in fourteen 
years, 10 per cent in sixteen years, 10 per cent in eighteen years, 10 
per cent in twenty years, 15 per cent in twenty- two years, and 15 per 
cent in twenty- three and one-half years. Attached to each bond, shall 
be coupons, numbered consecutively, also bearing the number of the 
bond to which it is attached, for the payment of interest as herein 
provided. 

Sec. 5. All payments upon the principal of any loan, shall be 
credited to the sinking fund for payment of bonds at maturity. 

Sec. 6. Any bank or trust or insurance company, organized under 
the laws of this State, may invest in the bonds issued under the pro- 
visions of this act. The officer having charge of any sinking fund of 
this State or of any county, city, town, township, or school district 
thereof, may invest the sinking fund of the State or of such county, 
city, town, township, or school district in " Oklahoma Home Owner- 
ship Bonds," which mature prior to the due date of the bonded indebt- 
edness for the payment of which such sinking fund is created. Said 
bonds shall be approved collateral as security for the deposit of 
any public funds or trust funds and for the investment of trust 
funds. 

Sec 7. Said bonds shall be signed by the Governor and by the 
President of the State Board of Agriculture, also by the State Auditor, 
with the seal of his office affixed, and each interest coupon attached 
thereto, shall bear the facsimile signature of the State Auditor. Said 
bonds shall be registered by the State Auditor. Said bonds shall be 
registered by the State Treasurer with appropriate endorsement 
thereon, showing such registration. 

Sec. 8. All "Oklahoma Home Ownership Bonds," issued as pro- 
vided by this Act, together with the interest thereon, shall be paid 
in the order in which they fall due. Should the Commissioners of the 
Land Office fail to pay any bond (or coupon) issued pursuant to this 
Act, upon presentation of the same, at or after date of maturity, the 
holder thereof may, by mandamus, compel payment of same; Pro- 
vided, that nothing in this Act, shall be construed so as to in any 
manner hold the State of Oklahoma liable for the payment of such 



RURAL CREDITS 783 

bonds, but they shall be paid from the proceeds of the loans herein 
authorized to be made. 

Sec. 9. Any premium upon bonds sold, and the difference between 
interest paid upon the bonds and the interest collected upon loans, 
shall be paid into the State Treasury and kept in a special fund to 
be known as the " Maintenance Fund" from which shall be paid all 
expenses of loaning this fund and the sale of the bonds. 

Sec. 10. The Commissioners of the Land Office shall have power 
to provide all necessary rules for the investment of this fund, not 
inconsistent herewith, and to employ such assistance as may be 
necessary and to fix the compensation of the same, requiring each 
employee to file an approved bond equal to the maximum amount of 
such fund that may be in his possession or subject to his order at 
any time. 

Sec. 11. It shall be the duty of the State Examiner and Inspector 
to make a thorough examination of said fund annually, and to furnish 
a copy of his report to each holder of any "Oklahoma Home Ownership 
Bonds," whose name and address he may reasonably secure, and he 
shall file a copy of same with the Governor. 

Passed January 28, 1915. 

Note. — The act of January 28 was amended on March 22. 
Besides minor changes which I have incorporated in the version of 
the act printed above, the following provision was added. — Editor. 

Sec. 3. For the purpose of paying all expenses of loaning the 
funds provided in Sections 1 and 2 of said Act, and of the preparation 
and sale of the "Oklahoma Home Ownership Bonds," there is hereby 
appropriated out of any money in the general fund of the treasury 
of the State, not otherwise appropriated, for the fiscal year ending 
June 30, 1916, the sum of Ten Thousand ($10,000.00) Dollars, or so 
much of said sum as may be necessary for said purpose; provided, 
however, that the general fund of the treasury of the State shall be 
reimbursed from time to time by the Commissioners of the Land 
Office in any amount available from the "maintenance fund" created 
by Section 9 of said Act, until the full amount expended under this 
appropriation is repaid. 

Passed March 22, 19 15. 



784 AGRICULTURAL ECONOMICS 

252. THE MISSOURI LAND BANK 1 

An Act to secure a system to mobilize and liquidize farm credits, securing to the 
agricultural classes money on long-time credits and at low rates of interest 
so as to amortize the debt by small periodical payments, for which purpose a 
fund is provided and a corporation created to utilize state machinery and be 
governed by a board of high state officers authorized to make loans on farms 
secured by deeds of trust and issue debenture bonds against the same, 
exempting such securities from taxes and making them acceptable for certain 
investments, thus increasing the revenue by bringing foreign capital into 
the state 

Be it enacted by the General Assembly of the State of Missouri as 
follows: 

Section i. For the purpose of fostering and encouraging agri- 
culture in the state of Missouri, and of aiding in the development and 
improvement of farm lands, there is hereby created a body corporate 
and politic under the name of the Missouri Land Bank. 

Sec. 2. The design and purpose of this act is to provide the 
means and instrumentalities whereby loans may be made to tillers 
of the soil at the least practicable cost to them, to be repaid in such 
manner and at such times as will be least burdensome, and at the 
same time provide suitable guaranties against loss. 

Sec. 3. The said bank shall be under the direction and super- 
vision of a board of governors, composed of the governor, attorney- 
general, secretary of state, state treasurer, and state auditor, who shall 
have the power to adopt rules and regulations for the government of 
the bank and the transaction of its business which shall not be incon- 
sistent with this act, nor in conflict with the constitution and laws of 
the state. Among other things they shall adopt forms of notes and 
deeds of trust and debenture bonds. 

Sec. 4. The said bank shall be located at the seat of government 
and annexed to the office of the state bank commissioner, who shall 
be the manager thereof, and the clerks and employes in his office shall 
perform all the services necessary in the transaction of such of its 
business as needs to be transacted in the office or counting room. All 
additional clerks and servants necessary shall be paid for out of the 
bank's funds. 

Sec. 5. The bank shall have power to make loans to farmers, 
evidenced by promissory notes secured by deeds of trust in the nature 
of mortgage on farm lands, of amounts not in excess of fifty (50) per 

1 Laws of Missouri, 1915, pp. 196-201. 



RURAL CREDITS 785 

cent of the appraised value of the land pledged to run for periods of 
not less than five (5) years nor more than twenty-five (25) years, and 
no loan shall be for a less sum than two hundred and fifty ($250.00) 
dollars, nor for a greater sum than ten thousand ($10,000.00) dollars; 
and inasmuch as it is the policy of this act to improve and develop the 
largest possible number of farms and make them productive, the 
board shall so order and adjust its business as to give preference to 
those seeking loans of amounts less than five thousand ($5,000.00) 
dollars. The board shall so provide that loans shall be made only to 
applicants who offer first liens on perfect fee simple titles, free from 
courtesy, dower, and homestead exemptions, and in no case shall 
loans be made for speculation or otherwise than for the following 
productive purposes, to-wit: 

a) To increase the productiveness of the land mortgaged. 

b) To make useful improvements thereon. 

c) To pay off liens or incumbrances, or to make part payment of 
purchase price where the borrower is paying part of the purchase 
money. 

d) Twenty-five (25) per cent of the amount lent may be used for 
the purchase of stock and machinery. 

Sec. 6. In making loans and taking deeds of trust provision 
shall be made for the payment of all or part of the loan at any interest 
period, and for the amortization of the debt by the payment annually 
or semi-annually of the interest at the rate fixed and small instalments 
of the principal debt at like periods, and for the payment of J of 1 per 
cent to create a reserve fund, all so adjusted as to discharge the debt 
in the number of years desired by the debtor within the limit hereto- 
fore mentioned, as, for example: If the loan should amount to one 
hundred ($100 .00) dollars and be made at the interest rate of four and 
three-tenths (4.3) per cent, it would be amortized approximately as 
follows : 

Duration Annual Payments 

5 years $22 . 40 

* 10 years 12 . 40 

1 5 years 9.10 

20 years 7 . 50 

25 years 6 . 50 

If, therefore, the bank should sell the bonds for four and three- 
tenths (4.3) per cent, and collect ^ of 1 per cent for the reserve fund, 
the loan would mature according to the desire of the borrower on the 



786 AGRICULTURAL ECONOMICS 

above approximate basis of annual payments. It will be seen that 
if the loan were made for a period of twenty-five (25) years the bor- 
rower would pay a total of approximately six and one-half (6|) per 
cent thereon, made up as follows : interest 4 . 3 per cent, reserve J of 
1 per cent; on the principal, 1 .7 per cent. 

Sec. 7. The state shall be divided into appraisement districts 
and the manager shall appoint, subject to the approval of the board of 
governors, expert appraisers in their districts. The salary of 
appraisers shall be two thousand ($2,000.00) dollars per annum and 
expenses. When an application is made for a loan an appraiser shall 
be designated to make the appraisement of the land offered as security. 
He shall appraise the land at its cash value and make his report 
thereon under oath without delay, giving also in said report such 
information as he may have concerning the applicant and the land 
as to the desirability of the loan. The applicant must offer an 
abstract of title which shall be examined by the prosecuting attorney 
and a report made by him in writing, giving his opinion as to the 
state of the title, which then shall be examined by the attorney- 
general and his opinion endorsed thereon. The manager may require 
any county officer and may ask any bank or trust company located 
in the county of the applicant's residence to give without charge any 
information desired relative to the applicant and the loan. 

Sec. 8. In all cases where service is rendered by a public officer 
who receives a salary out of public funds, he shall perform the service 
without fee, and such services shall be understood to be covered by 
the salary paid to him. The attorney-general shall be the legal 
advisor of the board, and the prosecuting attorney of the county in 
which the land is situated shall render all legal services needed in 
connection with the title and with foreclosure proceedings, or steps 
taken for the collection of moneys. 

Sec. 9. In all deeds of trust given to secure loans the state bank 
commissioner shall be named by the title of his office as trustee, and 
in case of default necessitating foreclosure, he may act in person or 
by attorney in fact, or by one of the state bank examiners, whose 
duties as examiner shall necessitate his presence in that part of the 
state, so that he may be able to attend at the time and place of fore- 
closure sale with a minimum of traveling expenses, and there shall be 
no charge for trustee's fees in connection with the foreclosure sale. 

Sec. 10. The said deeds of trust shall likewise contain such pro- 
visions as to make it unnecessary to give notice of intended fore- 






RURAL CREDITS 787 

closure by newspaper publication, but that such notice may be made 
by handbills, and that a copy thereof shall be mailed to the maker 
of the note 

Sec. 11. In case of foreclosure, the bank shall have authority 
to buy lands at the foreclosure sale if necessary to protect it from loss 
but the manager shall make every reasonable effort to secure the 
payment of the money due the bank without buying the land. 

Sec. 1 2 . The bank shall have no capital stock divided into shares, 
but its working capital shall be provided as follows: that is to say: 
the general assembly shall appropriate out of the moneys in the state 
treasury one million ($1,000,000.00) dollars. When the bank shall 
have loaned five hundred thousand ($500,000.00) dollars thereof, and 
shall have on hand notes to that amount secured by deeds of trust, as 
herein provided, it shall have power to sell and issue its debenture 
bonds for like amounts. The said bonds shall recite on their face that 
they are secured by notes for the amounts thereof, which are secured 
by deeds of trust on farm lands in the state of Missouri appraised at 
double the face value of the said bonds, and further secured by the 
funds of the said bank as provided under the terms of this act. 

Sec. 13. After the first issue of five hundred thousand ($500,- 
000 . 00) dollars of bonds above mentioned, the bank may sell and issue 
a like series of its debenture bonds under the limitations herein pre- 
scribed at any time and as often as in the judgment of the manager 
there shall be on hand notes and deeds of trust of an amount suffi- 
ciently large to make a series. Each issue shall constitute a series 
and shall be designated by a serial letter or number, or by both a 
serial letter and number, beginning with the first issue, and each 
bond shall also have an individual number. 

Sec. 14. Bonds may be issued on notes and deeds of trust to 
aggregate amount of forty million ($40,000,000.00) dollars based on 
the original one million ($1,000,000.00) dollars of working capital. 
Further issues may be made indefinitely at a ratio of $30 . 00 of bonds 
to $1 . 00 of the reserve as against the accumulation of the nej: annual 
reserve as hereinafter provided. 

Sec. 15. The property of the said bank including capital, notes, 
and mortgages and also debenture bonds issued by it as provided for 
in this act shall all be exempt from state, county, and municipal taxes 
of any and all kinds. 

Sec. 16. On the amount loaned to each borrower the bank shall 
collect at the rate of J of 1 per cent annually during the currency of 



788 AGRICULTURAL ECONOMICS 

the said loan, which amount shall be paid into the reserve fund out 
of which expenses of operation and loss, if any may be paid. The 
bank shall have discretionary power to refund to each borrower whose 
loan has run for at least ten (10) years, on full payment of his notes, 
the said J of i per cent collected thereon, or so much thereof as remains 
after charging it with its share of expenses and loss, if any have been 
sustained. 

Sec. 17. The said reserve fund shall as far as practicable be kept 
invested in bonds of the state of Missouri, of the United States, or of 
other states of the United States, or in such other safe securities as the 
board of governors may from time to time designate and the income 
thereof shall be added to the said fund and become a part thereof. 

Sec. 18. Whenever the reserve fund shall have accumulated to 
an amount sufficiently large that the bank's business will not suffer 
by its return to the state, the board of governors shall notify the 
general assembly of its opinion to that effect, and thereupon provision 
may be made for its repayment to the state. 

Sec. 19. The first $500,000.00 shall be loaned to applicants at 
the interest rate of four and three- tenths (4.3) per cent so that their 
loans will be amortized or retired according to the approximate esti- 
mate heretofore scheduled. Thereafter loans must be made at the 
rate which the bank shall be able to secure for the next preceding issue 
of bonds, and thereupon the manager shall cause to be made a new 
amortization table based on said interest rate. 

Sec. 20. The manager may determine from time to time the 
length of time bonds shall run and upon what method they may be 
recalled so as to conform the amount of the bonds outstanding to the 
amount of the mortgage on hand, and there must always be a sub- 
stantial agreement between the amount of outstanding bonds and 
notes and mortgages on hand. 

Sec. 21. The board of governors shall designate the persons or 
officers who shall be required to give bonds for the faithful discharge 
of the duties required of them 

Sec. 22. [Debenture bonds approved investment for banks and 
trust companies handling savings and for deposit with insurance 
department, same as bonds of the state.] 

Sec. 23. [Act not effective until December 1, 1916.] 

Approved March 23, igi 5. 

Note. — The postponement of the operation of the act, provided 
for in Section 23, was due to the fact that there was at least grave 



RURAL CREDITS 789 

doubt of the constitutionality of action appropriating state funds for 
the purposes of a land bank and exempting it from taxes. The bill 
was therefore accompanied by a concurrent resolution providing for 
the submission of the necessary amendment of the state constitution 
to the voters at the regular election in November, 191 6. —Editor. 

253. THE FEDERAL FARM LOAN ACT 

After several years of agitation and the rejection of scores of rural 
credit bills, Congress has at length passed a land credit measure, to 
be known as the Federal Farm Loan act. This act was approved by 
the President on July 17, 1916, and, with the lapse of only a few days, 
announcement was made of appointments to the board whose task 
it will be to organize and put the system in operation. This measure 
shows a certain resemblance to the Federal Reserve act, in that it 
provides for local loan associations, regional land banks, and a general 
supervisory bureau under the control and direction of a Farm Loan 
Board. In addition, provision is made for "joint stock land banks," 
analogous in function to the federal farm land banks but making it 
possible for private mortgage companies to preserve their existence. 

ORGANIZATION OF THE SYSTEM 

Federal Farm Loan Board. — At the head of the farm loan system 
stands the Federal Farm Loan Board. The Secretary of the Treasury 
serves upon this board as a member and chairman ex officio, and there 
are four other members appointed by the President with the approval 
of the Senate. Not more than two of these members may be chosen 
from the same political party, and none of them may be an officer or 
director of any other organization engaged in a banking or land mort- 
gage business. The President shall designate one of the members 
of the board as the Farm Loan Commissioner, and he shall be the 
active executive officer of the board. Members shall serve for a 
period of eight years, and shall receive a salary of $10,000, together 
with necessary traveling expenses. 

The powers and duties of the Federal Farm Loan Board include 
the organizing and chartering of land banks and farm loan associa- 
tions; regulation of the rate of interest charged by federal land banks 
and of the charges made for appraisal, determination of title, and 
recording; making examinations of and requiring reports from all land 
banks and loan associations in the farm loan system; and supervising 
the issue of farm land bonds. They shall appoint a farm loan registrar 



790 AGRICULTURAL ECONOMICS 

and one or more land bank appraisers for each land bank district, and 
such land bank examiners as shall be deemed necessary. Of $100,000 
appropriated for organization expenses, they are instructed to use a 
"reasonable portion" for publicity purposes, familiarizing the public 
with the features of the new system and instructing farmers "regard- 
ing the methods and principles of co-operative credit and organi- 
zation." 

Federal land banks. — The second part of the farm loan system 
is made up of the various land banks. 

Continental United States is to be divided into twelve districts, 
to be known as federal land bank districts. These districts are to be 
apportioned with due regard to the farm loan needs of the country, 
but may be readjusted from time to time. In each district a federal 
farm loan bank shall be established, in some city selected by the 
Federal Farm Loan Board; later, branches may be established within 
the district. The affairs of the bank shall be managed by a board 
of nine directors, six of whom shall be known as local directors and 
shall be elected by the farm loan associations of the district, and three, 
known as district directors, shall be appointed by the Federal Farm 
Loan Board. Directors must have been residents of the district for 
at least two years prior to their election or appointment, and at least 
one of the district directors must be "experienced in practical farming 
and actually engaged at the time of his appointment in farming opera- 
tions within the district." No director may, during his continuance 
in office, act as an officer, director, or employee of any other concern 
engaged in the business of banking or of dealing in land mortgage 
loans. 

The capital stock which each federal land bank must have before 
beginning operation shall be $750,000, divided into shares of $5 each, 
and may be subscribed for by any individual, firm, or corporation or 
by any state or by the United States. If, after subscription books 
have been open for thirty days, any part of the capital stock still 
remains unsubscribed, the Secretary of the Treasury of the United 
States shall subscribe the balance in behalf of the United States. 
Stock owned by the government shall receive no dividends, but all 
other stock shall share in dividend distributions without preference. 
Each farm loan association and the government of the United States 
shall be entitled to one vote for each share of stock which they hold, 
and no other shareholder shall be permitted to vote. After the 
$750,000 of capital necessary for beginning operation has been secured 



RURAL CREDITS 791 

by the methods mentioned above, the bank shall apply semi-annually 
25 per cent of all sums thereafter subscribed to capital stock, to paying 
and retiring this original capital stock at par. Thereafter, stock shall 
be issued only to farm loan associations (or individuals who borrow 
through agents of the land bank, where no loan association exists) 
in amounts equal to 5 per cent of all loans secured by them. At least 
25 per cent of that part of the capital for which stock is outstanding 
in the name of national farm loan associations shall be in the form of 
quick assets — at least 5 per cent in United States government bonds. 

Joint stock land banks are organized upon the same plan as the 
federal land bank so far as possible. Instead of the board of nine 
appointed and elected directors, they have a board of their own 
choice, which shall not be less than five in number. There shall be 
at least ten incorporators, and the government shall not at any time 
subscribe to the capital stock of such joint stock banks. They may 
not issue farm loan bonds in excess of fifteen times the amount of their 
capital and surplus, though federal land banks may issue to twenty 
times their capital and surplus. Joint stock banks must have a 
capital of at least $250,000 subscribed and one-half of it paid in cash 
before they can begin business, and may not issue any bonds until the 
capital stock is entirely paid up. Their bonds must be readily dis- 
tinguishable in form and color from those of federal land banks. 

The zone of operations of joint stock banks is limited to the state 
in which their principal office is located, and one other state which is 
contiguous to it. 

National farm loan associations. — It is evident that the joint 
stock land 'banks deal directly with farm borrowers. The federal 
land banks, on the other hand, are expected to carry on their loan 
operations through local associations of borrowers somewhat similar 
to our building and loan associations. "Ten or more natural persons 
who are the owners, or about to become the owners, of farm land 
qualified as security for a mortgage loan under this act," may unite 
to form such a national farm loan association: no persons except 
borrowers on farm land mortgages may become members or share- 
holders. The general management of the affairs of the loan associa- 
tions shall be in the hands of a board of directors consisting of five 
members. Directors and all officers except the secretary-treasurer 
shall serve without compensation, unless the Federal Farm Loan 
Board shall authorize the payment of salaries. The secretary- 
treasurer shall attend to the routine business of the organization; he 



792 AGRICULTURAL ECONOMICS 

shall collect and transmit interest or other payments, receive funds 
from the land bank and pay them over to borrowers, and assure 
himself from time to time that the funds loaned through the associa- 
tion are applied to the purposes set forth in the borrowers' applica- 
tions. He need not be a shareholder in the association. 

The capital stock of the national farm loan associations shall be 
divided into shares of a par value of $5 each. The total amount will 
depend upon the volume of loans outstanding, since a share of stock 
is issued for each $100 (or major portion thereof) extended as a loan, 
and paid off at par and retired whenever the loan is paid in full. The 
borrower is to be paid any dividends which may accrue on stock out- 
standing. He may cast one vote for each share of stock which he 
holds, except that no shareholder shall cast more than twenty votes. 
Shareholders are "held individually responsible, equally and ratably, 
and not one for another," for the debts and obligations of the associa- 
tion, to double the amount of their stock holdings. This means that 
they follow American practice rather than the pattern of European 
co-operative organizations. 

OPERATION Or THE SYSTEM 

Method of making loans. — The farmer who desires to secure a loan 
on his land has two courses open to him. He may borrow from a 
joint stock land bank direct, as he would borrow from the ordinary 
mortgage company. Or he may borrow from a federal land bank, 
through a national farm loan association if one has been organized 
in his community or if he can interest a Sufficient number of other 
borrowers to effect such organization. 1 He may be admitted to 
membership "by a two-thirds vote of the directors upon subscribing for 
one share of the capital stock of such association for each $100 of th<T 
face of his proposed loan or any major fractional part thereof." This 
stock subscription is supposed to be paid in cash upon the granting 
of the loan, but the sum necessary to make this payment may be 
borrowed by the prospective member from the federal land bank, this 
sum to be added to the face of his loan and paid off in amortization 

1 It should be noted also that if, after the act has been in force one year, farm 
loan associations have not been formed and are not likely to be formed in any 
locality because of peculiar local conditions, the Federal Farm Loan Board may 
authorize some bank, trust company, mortgage company, or savings institution 
to act as an agent of the federal land bank of the given district and make loans for 
it in the locality not otherwise served. 



RURAL CREDITS 793 

payments, provided the total does not exceed the maximum permitted 
by the security offered. 

Each application for a loan is passed upon by a loan committee 
of the association, who appraise the land, and make a detailed written 
report. No loan shall be approved by the directors unless all three 
members of the loan committee agree upon a favorable report. 
Before the loan is finally granted, a second examination is made by 
the appraiser of the federal land bank from which the funds are to 
be secured. National farm loan associations may loan only upon 
the security of first mortgages on farm land of their members and not 
to exceed 50 per cent of the value of the land for agricultural purposes 
and 20 per cent of the value of permanent, insured improvements. 
Loans may not be less than $100 nor more than $10,000 in amount, 
and the association will not be given a charter before the total of loans 
applied for is at least $20,000. No loans shall be made to any person 
who is not at the time, or shortly to become, engaged in the cultiva- 
tion of the farm mortgaged, and his borrowing must be for one of the 
following purposes: (a) to provide for the purchase of land for agri- 
cultural uses; (b) for the purchase of equipment, fertilizers, and live 
stock necessary for the proper and reasonable operation of the 
mortgaged farm; (c) for buildings and improvements of farm lands; 
(d) to liquidate indebtedness incurred for purposes (a), (b), and (c). 

The manner in which the farm loan association secures funds to 
loan to its members is as follows: Whenever any national farm loan 
association desires to secure a mortgage loan for any member, it shall 
subscribe for capital stock of the federal land bank of its district, to 
an amount equal to 5 per cent of the amount of the loan desired. This 
stock is held by the land bank as collateral security for the payment 
of the loan, but the association shall receive any dividends which it 
may earn. Having thus affiliated itself with the federal land bank 
(the resemblance to the federal reserve system is obvious), the farm 
loan association may indorse the first mortgage which it has received 
from its member, and turn it over to the federal land bank in exchange 
for funds. These may be either current funds or farm land bonds, 
at the option of the borrower. In case of default in the payment of 
any such mortgage, the national farm loan association is, by reason 
of its indorsement, still liable and must make good any loss incurred 
by the land bank. 

Naturally the joint stock land banks are freed from the restriction 
upon federal land banks of loaning only to members of farm loan 



794 AGRICULTURAL ECONOMICS 

associations; the size of loan granted to one person and the purposes 
for which loans may be made are also left to their own discretion. The 
interest rates which they charge may not exceed 6 per cent nor be 
more than i per cent above the rate established for the last series of 
farm loan bonds issued by them. Their mortgages must provide for 
amortization payments. 

The rate of interest charged the farm borrower is not to exceed 
the interest rate on the last issue of farm loan bonds put out by the 
land bank through which the loan is secured, plus a charge of not more 
than i per cent to cover the cost of administration and a profit. This 
gross rate, however, shall not be more than 6 per cent per annum. 
In granting the loan the federal land bank is authorized to charge the 
applicant reasonable fees to cover the actual cost of appraisal and 
determination of title. Legal fees and recording charges imposed by 
law in the state where the land to be mortgaged is located may also 
be included in the preliminary costs of negotiating mortgage loans. 
These costs the borrower may pay or he may have their amount added 
to the face of his loan, to be discharged by amortization payments. 
Furthermore, each annual or semi-annual payment by the borrower 
shall include, besides the amount due for interest on his loan, such 
an additional sum as will amortize the debt within an agreed period 
not less than five years nor more than forty years. After five years 
from the date of the loan, additional payments of $25 or any multiple 
thereof may be made or the whole remaining principal may be paid 
up on any instalment date. 

Issue and sale of bonds. — The method by which both federal and 
joint stock land banks finance their loan operations is through the 
sale of debentures. These are to be known as "farm loan bonds," 
and shall be issued by land banks only under specific authorization of 
the Federal Farm Loan Board. Each district is to have a farm loan 
registrar, appointed by the Federal Farm Loan Board, to whom land 
banks desiring to issue bonds may bring the mortgages which they 
have taken from borrowers (through farm loan associations or other- 
wise). If these securities are approved by the Federal Farm Loan 
Board, the land bank is given farm loan bonds of equal amount in 
exchange therefor, by the farm loan registrar. The mortgages are 
retained by the registrar as collateral, being assigned to him in trust 
by the land bank. The registrar may at his discretion allow the land 
bank to withdraw such of their mortgages as are paid off, and substi- 



RURAL CREDITS 795 

tute other first mortgages or, temporarily, to substitute United States 
government bonds or cash. 

Farm land bonds shall be issued in denominations of $25, $50, 
$100, $500, and $1,000, and shall run for specified maximum and 
minimum periods, subject to retirement at the option of the land 
bank at any time after five years from the date of issue. They shall 
bear interest coupons payable semi-annually, at a rate of interest not 
greater than 5 per cent per annum. The bonds shall be prepared by 
the Treasury Department, but their cost assessed upon the issuing 
banks. Every federal land bank shall be liable for interest payments 
upon any farm loan bonds of other federal land banks which have 
defaulted in such payment, and in case either interest or principal 
remains unpaid after the assets of a defaulting land bank have been 
liquidated and distributed, such losses shall be assessed upon solvent 
land banks in proportion to the farm loan bonds which each has out- 
standing. These bonds are exempt from national, state, and local 
taxes. 1 

Interest, amortization, or other payments received by federal or 
joint stock land banks must be credited upon the mortgage held by the 
farm loan registrar, each such payment being reported to the registrar 
by the land bank. All such payments upon principal shall constitute 
a trust fund in the hands of the land bank; they may be applied by a 
federal land bank (a) to pay off their own farm loan bonds as they 
mature, (b) to purchase at or below par farm loan bonds issued by 
themselves or any other federal land bank, (c) to loan on first mort- 
gages, (d) to purchase United States government bonds. Joint stock 
land banks may make similar disposition of such payments, except 
that in (b) they are free to purchase, at or below par, any farm land 
bonds. The securities so purchased or the cash constituting a trust 
fund for the ultimate redemption of mortgages must be deposited 
with the farm loan registrar as substituted collateral for the payments 
which have been made upon these mortgages. When they have been 
paid in full, the registrar shall cancel and deliver them to the proper 
land bank for delivery to the original maker or his representative. 

1 So too are the capital and surplus, or reserve, of federal land banks and farm 
loan associations. The capital (but not the bonds) of joint stock land banks are 
taxable. 



XV 
AGRICULTURAL WAGES 

Introduction 

The question of the return to the labor factor in agriculture — the 
wages of farm labor — is one which has not as yet been analyzed with 
sufficient thoroughness and penetration. Those economists who have 
applied themselves to the problems of distribution have naturally 
sought out the most clear-cut and completely differentiated cases 
which they could find and have secured from these near-laboratory 
conditions an insight into the fundamental laws which determine the 
amounts of the various distributive shares. But the agricultural 
economist must apply these theories under much more complex 
conditions, where the line between the laborer, capitalist, landlord, 
and entrepreneur functions is vastly more dubious than in incorporated 
industry. There is difficulty in computing the amount of the labor 
return in agriculture, not merely because it almost invariably is fused 
into a joint return from other than labor contributions to production, 
but likewise because it is partly paid in the form of " living," of increase 
in capital (without any conscious process of saving), and of numerous 
personal and domestic values of an intangible sort. These items are 
often more important than the cash return. Sections A, B, and C 
offer some suggestions and guidance in working out the general process 
by which wage rates are determined. But to understand the precise 
outcome of these wage-making forces in agriculture we must have 
careful studies from varied agricultural conditions. Only in recent 
years have serious beginnings been made toward supplying this need. 

Far too many of the statements of labor-returns in agriculture 
which have passed current have dealt with the net cash income of 
the farmer rather than with his real wages, overlooking the value of 
what was consumed directly from the produce of the farm. Selections 
263 and 264 indicate the progress which has been made in methods of 
measuring the income which the farm worker actually secures in 
return for his labor, and selection 265 points out some further con- 
siderations necessary to the proper comparison of one time with 
another to ascertain the trend of real wages. 

796 



AGRICULTURAL WAGES 797 

Selection 266 gives actual figures for farm labor hired on a strict 
wage basis and 267 presents generalizations for all farm workers. In 
this connection a difficulty presents itself. Logically we must define 
wages as the return to the labor factor in production and, under such 
definition, there is a wage for the self-employed farmer as well as for 
his hired man. Since the amount of this wage, however, is a question 
of accounting rather than of bargaining, it becomes a difficult matter 
to get at the precise figure of the employer's labor income. Particu- 
larly are we puzzled to say what is truly wages and what should 
properly be known as profits. The present discussion, therefore, 
merges into that of chapter xvii. 

A. Some Points of Theory 

254. THE NATURE AND RATE OF WAGES 1 
By EDWIN R. A. SELIGMAN 

Wages are the remuneration of labor. They are paid for the 
services of human beings, as rents are paid for the services of things. 
If by price we mean value in the market, wages are a price just as 
rent and interest are prices. The law of wages must be like that of rent 
and interest, for the law of all price is the same. Wages, however, 
differ in some respects from rent and interest. Net interest is always 
the same in a given market, being the price paid for the use of an 
aliquot part of a homogeneous fund. Wages, however, vary with 
the kind of labor. The wages of the skilled workman are higher than 
those of the unskilled; the wages of the foreman shade into the salary 
of the manager. On the other hand, wages differ from rents. Rents 
vary from zero to prodigious sums. Human beings, on the other 
hand, must live. The recompense of labor must be large enough to 
enable the workman at least to exist. Wages therefore cannot fall 
below a positive minimum which is absent in the case of commodities. 

Wages, although they are undoubtedly prices, may yet be usefully 
contrasted with the prices of things. Labor is a commodity in the 
sense that everything which has a price is a commodity. Labor, 
however, is a peculiar kind of commodity. The chief peculiarities 
are four in number. (1) Commodities are produced for the services 
which they render. The increased supply of human beings is not 
due to any such consideration. (2) A commodity once in existence 

1 Adapted from Principles of Economics (3d ed.), pp. 411, 416-20. (Copy- 
right by Longmans, Green, & Co.) 



798 AGRICULTURAL ECONOMICS 

continues to give its services unbidden; a laborer may work or not 
as he lists. Commodity takes no holiday and does not strike. The 
mule and the slave respond to the lash; harsh treatment of the work- 
man may diminish rather than augment output. (3) Labor is perish- 
able while many commodities are durable. After the lapse of a certain 
time a laborer must sell his labor or starve. Laborers and capitalists 
need each other, but under normal conditions the need of the laborer 
is more urgent. (4) Finally, labor is inseparable from the laborer, 
while the commodity may be separated from its owner. Commodities 
are sold wherever the owner desires; labor can be sold only where 
the laborer is. 

In order to reach a consistent theory of wages we must revert to 
fundamental principles. All things possess value because of the 
services which they render. The value of all production goods depends 
on the value of the consumption goods. Production goods, however, 
are composed not only of concrete objects, but of labor. Labor, there- 
fore, has a value because its services or products have a value; it secures 
a remuneration because it produces something for which people are 
willing to pay. In other words, wages depend on productivity. 

The value of labor, however, like the value of all things, is affected 
by marginal increments. If a man applies his labor to land which is 
so abundant that it can be had for the asking, there will be no rent of 
the land, and the value of the entire product will consist of wages. 
By increasing the number of workmen, the product may be more 
than proportionately increased, because the plot may be large and 
several laborers in co-operation may establish so much better results 
that the share of each will be greater. After the point of maximum 
utilization has been reached, however, the law of diminishing returns 
will assert itself, and each additional laborer will add relatively less 
to the product, until if the product were continued long enough a 
new laborer would make no new addition at all. The process will 
never actually be carried to this point. At any given time, however, 
there is always a final or marginal workman who is making some con- 
tribution to the product. If there is free competition and if all the 
laborers do their allotted task equally well, so that there is no choice 
between them, the share of the product ascribable to any of the work- 
men must be equal to the additions made by the last or marginal 
laborer actually at work. Since the value of the entire product is 
here due to labor, the rate of wages is equal to the product of the 
marginal laborer. Wages depend on marginal productivity. 






AGRICULTURAL WAGES 799 

In actual life, indeed, the quantities of land and capital are fixed 
just as little as is the number of laborers. The marginal employment 
of laborers will therefore depend not alone on the amount of labor, 
but on the amount of the other productive factors. For these are 
all competing with each other. At a certain point in the process of 
increasing the number of workmen on a given plot of land it will be 
more profitable to use more land instead of more workmen; and as 
the better land acquires a value, a part of the product will consist of 
land rent. In the same way at a certain point it will pay better to 
use more machinery, so that an increasing part of the product will 
consist of the rent of the machinery or of the interest on the capital 
invested in it. And if there are continual temporary changes going 
on, a part of the product will take the shape of profits to the entre- 
preneur. All this, however, though it may obscure, cannot prevent, 
the fact that there is always a point of marginal employment of labor, 
and that at this margin there is the certain part of the product 
ascribable to labor. The normal rate of wages, that is, the amount 
to which wages tend to conform under conditions of free competition 
and mobility of both capital and labor, is the amount of value which 
a given increment of labor produces at the margin. 

It may be claimed that the productivity of anything at the margin 
depends on relative scarcity. Scarcity, however, connotes supply, 
and the supply of labor, like that of other things, depends on the cost 
of production. This raises the question of the cost of living, and the 
cost of living at any time is affected by the standard of life. The 
standard of the Chinese coolie differs from that of the American 
workman; the standard of the farm hand from that of the factory 
operator. When the cost theory of wages is couched in terms of the 
standard of life theory it loses the pessimistic connotation of the old 
minimum of subsistence doctrine. . For if wages vary with the standard 
of life, anything which lifts the standard will raise the rate of wages. 

In reality, however, the standard of life cannot accomplish the 
impossible. The highest standard will not prevent wages from falling 
in the face of a decrease in the demand for the product and a decline 
in industrial prosperity. If the employers cannot sell their product 
at a given price, they must lower the cost or abandon the business. 
From this point of view the cost of labor is like the cost of anything 
else; it must adjust itself to the price. 

The standard of life theory and the productivity theory may thus 
be declared complementary. They are both true in the sense that 



800 AGRICULTURAL ECONOMICS 

the cost and the utility theories of value are true. Cost seems to be 
the cause of value, but is in reality a measure rather than a cause. 
The rate of wages may be expressed in terms either of marginal 
productivity or of the standard of life, but the positive force is pro- 
ductivity. 

The standard of life, however, is of exceedingly great importance. 
It often serves as a dyke to prevent for a time at least the inundation 
of the field. With ordinary commodities, a newcomer who can produce 
the same goods at lower cost will reduce the price. To the ordinary 
producer low cost of product means high gains; to the laborer low 
cost of the product, that is, low wages, means low gains. It is only 
where the newcomers are habituated to a lower standard and where 
the exigencies of the situation force them to accept the smallest sum 
the employers will give, that the real difficulty arises. Thus women's 
wages are frequently lower than men's, not only because in some 
occupations women produce less than men, but also because, even 
where the product is the same, the woman's standard of life is lower 
in that she is generally not the support of the family and is often 
not entirely dependent on her earnings. In the same way the immi- 
grant receives lower wages than the native workman, not only because 
his contribution to the product is frequently less through ignorance 
or lack of skill, but because his standard of life is so much lower that 
he will be willing to work for less — at least until he becomes educated 
up to the new standard of life. 

255. THE LABORER'S SHARE IN DISTRIBUTION 1 
By A. W. FLUX 

We have now to consider the application of the principles devel- 
oped in the general discussion of value to the special case of labor, that 
is to say, to study the problem of wages. In doing so, we have, as in 
the preceding chapters, to give our attention to the demand and supply 
sides of the problem in turn. We take up first the demand side. 
What can an employer afford to pay for labor? The obvious and 
direct answer is, As much as the labor is worth and no more. This, 
however, requires closer examination. 

Labor is generally associated with capital and land in production, 
and we need to form a conception of the value of the contribution to 

1 Adapted from Economic Principles, pp. 118-30, 134. (Used by permission 
of the publishers, E. P. Dutton & Co.) 



AGRICULTURAL WAGES 80 1 

the joint product, which labor makes. Then, too, different kinds of 
labor, paid at many different rates, are employed together, and the 
contributions of the various grades to the total result must be dis- 
entangled from one another if we would know what each grade is 
worth. 

Let us consider first the case of a group of laborers performing 
similar tasks. If their numbers can be increased or decreased slightly, 
without a change in the rest of the apparatus of production with 
which they are associated, the consequent change in the product can 
be directly attributed to the change in their numbers. The loss in 
product due to a loss of a workman, or the gain due to the addition 
of a workman represents that workman's effective product. But this 
can only be maintained if the change of numbers does not involve 
leaving some machinery or other productive appliances wholly or 
partially idle, that is, if the removal of a workman simply removes 
his own contribution to the product and not, in addition, that of a 
machine or some part of that of other workmen. In conceiving of a 
man's net product, we must, therefore, either conceive of a case where 
no readjustment of appliances to numbers using them is needed when 
one additional man is added to, or subtracted from, a working group, 
or else we must make comparison between two cases, the one where 
the available capital is given the forms needed for setting a larger 
number of men at work, the other where the same amount of capital 
is represented by appliances for a smaller number. When the larger 
and smaller numbers differ by unity, the difference in the product of 
the two groups is due, not to a difference in any other element, but 
purely to the difference of a workman more or less, and we may, 
therefore, reasonably call the difference the net product of that man's 
labor. If we may assume a knowledge of the interest on capital, the 
conception may be made simpler. We have merely to observe the 
difference in product due to the removal of one workman, to determine 
further the capital rendered idle by his removal, and, after assigning, 
from the total decrease of product, so much to capital as will account 
for the interest and depreciation on the capital thrown idle, attribute 
the remainder to the workman. 

In the case of the ordinary workman, whose place could be taken 
by any one of his fellow- workmen, it will be clear that the question of 
the amount of his net product is one which is not concerned with 
himself personally, but that any one of those who could replace him 
or whom he could replace must be regarded as having the same net 



802 AGRICULTURAL ECONOMICS 

product. Each in turn may be regarded as the last added, but the 
rate of all will conform to the productivity of the one actually added 
last, whether under conditions of increasing or of diminishing return. 
When, on the other hand, we have to deal with exceptional kinds of 
work, for which the available men capable of performing the work are 
few, the device for determining the individual contribution to the 
total product, to which recourse has been had above, is no longer 
necessary. The work of the individual being able to be more directly 
associated with its result, we are not met with any great difficulty in 
answering the question: What is the net product of a man's work? 
It was for the purpose of providing an answer to this question that 
it was necessary to give attention to marginal productivity when 
dealing with masses of men who, as individuals, could not be dealt 
with, since they formed indistinguishable parts of a mass of work- 
people, that is to say, parts indistinguishable for the purpose of assign- 
ing a distinct part, or a distinct share of the value, of the product to 
the work of the individuals in question, by any other method than the 
division of the value of the product by the number of those engaged 
in producing it. The value so divided would need to be disentangled 
from the productive contributions of other classes of workers, of 
capital, etc., and the preceding discussion is designed to afford a 
means for handling some of the obvious difficulties which the problem 
presents. 

We pass now to the consideration of the features which call for 
attention in reference to the supply-price of labor. This term is used 
to denote that price which will suffice to evoke a volume of supply 
adequate to the need at that price. Generally speaking, with a change 
in the supply needed, there will be a change in the corresponding 
supply-price. It may also be noted that this price is generally only 
one of the features which serve to influence the volume of labor 
available. Hours of labor and conditions of employment, for example, 
may be such as to either add to or detract from the attraction of a 
given price offered. 

As affecting the supply of labor, we need to distinguish clearly 
between the two kinds of problems we may have to consider. The 
supply-price may have reference to a supply, attracted to a given place 
and industry from other places, and from such other industries as 
can supply labor suitable for the ends in view. It may, on the other 
hand, be used in reference to the training of boys to a particular 
trade rather than to any of the other trades among which they are 



AGRICULTURAL WAGES 803 

practically able to choose; or even to a stimulation of a general 
increase in population by increase of births, resulting from the 
encouragement of marriages among young people due to generous 
remuneration of labor, whether the labor be self-employed or hired 
out to a master. In the first of the problems, the attraction of high 
wages in a particular industry or locality needs to be sufficient to 
outweigh the similar attraction of other industries, and also, perhaps, 
the common disinclination to change trade or place of residence, a dis- 
inclination which, though common, is not universal. Further, the 
number of hours in the day, days in the week, or weeks in the year, 
which are devoted to work is affected by the rate of remuneration 
secured. When these various features are taken into account, the 
range of elasticity of supply of labor can be estimated. The whole 
supply procurable may be such that its productivity is considerably 
greater than the equivalence of the price which is adequate to divert 
it from other employments and induce sufficient continuity and vigor 
of work. In this case the marginal demand-price may exceed the 
corresponding supply-price. Should rival employers be bidding 
keenly against each other for the control of such a supply of labor, 
the tendency would be for wages to be placed at a figure well above 
the lowest which would suffice to secure the requisite supply but for 
such competition among buyers. Again, if the sellers of the labor 
be conscious of the advantage they enjoy by such relative scarcity, 
and if they are good bargainers, or have enough of such among them 
to set a standard for the best, or be associated for the purpose and led 
by a good bargainer, they may secure for their labor a price well above 
what would suffice to prevent them from withdrawing part of the 
supply, though, of course, not exceeding the marginal demand-price 
determined by the productivity. If the employer were actuated by 
motives which made it important to secure labor even at a price 
which involved pecuniary loss, the wage might for a time go beyond 
even the equivalent of the marginal productivity. 

In a manner corresponding to that which affords peculiarly 
advantageous conditions to labor which is scarce, conditions exception- 
ally unfavorable may affect bodies of laborers who are unable or 
unwilling to transfer themselves to other localities or trades when 
their own occupation ceases to be profitable. A price for their labor 
which would not have sufficed to bring them into the trade or Locality 
may yet fail to reduce the supply to an amount which can be profitably 
employed at such adequate wages. The oversupplv will lead to one 



804 AGRICULTURAL ECONOMICS 

of two results. Part of the laborers may be without employment, and 
thus constrained by exceptional pressure to remove themselves from 
the overcrowded trade or locality. Or, the whole may find employ- 
ment at wages reduced to the level of the marginal productivity of the 
excessive supply. 

In what has preceded, reference has been made to the adjustment 
of the supply of labor, as between different trades, by influences 
affecting the choice of trades by young men just entering on life. A 
few years may make a considerable difference in the supply even of 
highly skilled labor, if strong inducements exist to select one branch 
of work rather than another at the moment when choice is least 
hampered. Later, a sacrifice of acquired skill must be made by a 
workman who seeks to change his trade, and such changes are there- 
fore hindered, quite apart from any customs, or union rules, requiring 
definite apprenticeship, perhaps before a definite age. Though indi- 
viduals be not free to choose from a wide range of employments, the 
ability to choose among a small number may have important effects 
in changing the distribution of labor from one generation to the 
next. 

The question of whether a given level of wages will suffice to 
maintain the supply of labor introduces the consideration of the 
standard of living among the recipients of the wages. What will 
be the result if the remuneration of labor fall short of the amount 
demanded by the standard of living ? This amount suffices to provide 
the necessaries and comforts of life according to the habits prevalent 
among the workers, and includes provision for the maintenance of a 
family. The former is implied in the supposition that personal ability 
to labor is maintained, for when expenditure is reduced, some reduc- 
tion takes place, in practice, in the expenditure which contributes to 
efficiency, as well as in that which has its chief object in affording 
satisfactions secured for their own sake. What has become con- 
ventionally necessary is yielded up with as great reluctance as what 
is demanded for the satisfaction of primary needs. The inclusion of 
provision for a family in the conception of the standard of living is 
demanded by the consideration that we are examining the conditions 
of existence of a class, not of individuals. That the class may be 
maintained in undiminished numbers, provision must be made for 
the rearing of children and their industrial training. Wages must, 
in fact, cover the necessaries of the wage-earners and of the dependent 
members of the class as well, those too young to earn, those engaged 



AGRICULTURAL WAGES 805 

in rearing children, those too old to support themselves. The wage 
which affords the means of attaining to the standard of living of the 
class is the supply-price of the labor of that class, and the preceding 
remarks have reference to this fact rather than to anything specifically 
stated in the words " standard of living." 

If wages, then, fall below the amount needed to maintain the class 
standard, the supply of labor will be reduced, either in amount, or in 
efficiency, or in both. Privation may render the members of the 
class more liable to attacks of disease, increasing the loss of work- 
ing time from that cause, and resulting in earlier death or incapa- 
city. Reduction of the more essential parts of consumption reacts 
on the efficiency of labor, which is also affected by the moral or 
intellectual attitude of workmen in reference to work which they 
regard as inadequately remunerated. 

In addition to these influences on the working efficiency of the 
living, it is necessary to consider the influence of reduced means on 
the natural increase of numbers. Though it may be true that some 
classes are reckless in regard to the responsibilities of parentage, and 
that, in consequence, their birth-rate shows no response to decreasing 
prosperity, the more intelligent members of the wage-earning classes, 
perhaps all except the very lowest grades, are influenced in this 
respect by adversity. A fall in earnings operates to retard mar- 
riage, since the class standard of family life cannot be supported 
on the reduced earnings. How general this influence is can be 
seen by comparison of the marriage-rate in prosperous and dull 
times. 

Wages cannot permanently exceed the value of the net product 
of labor at the margin of employment, and competition tends to make 
the two coincide. Wages, too, cannot permanently fall below the 
amount needed to maintain the standard of living of the class to which 
the labor belongs, and competition tends to make these two also 
coincide. As, in the general problem of value, utility and cost of 
production each tends to equality with exchange value, so too in this 
special case. The utility here is measured by the value of the 
product of labor at the margin of employment, while the cost of 
production includes the cost of the necessaries and comforts of life 
usual in the class to which the workman belongs, together with 
such luxuries as are also customary, the workman's family as well 
as himself needing support as a condition of the continuity of the 
labor supply. 



* 



806 AGRICULTURAL ECONOMICS 

B. Concerning the Demand for Labor 

256. VALUE OF PRODUCT AND THE SCHEDULE OF DEMAND 

FOR LABOR 1 

By GEORGE K. HOLMES 

The farmer has hardly been able to attract labor to the farm; the 
most that he has been able to do has been to hold labor with vary- 
ing degrees of failure. Competition has forced him to raise the level 
of wages since the Civil War, with some retrogressions in periods of 
severe industrial depression. A diminishing cost of production of 
farm products may have sustained farmers in paying higher wage 
rates, but practically nothing is known with precision with regard to 
the trend of the cost of products. An increased value of production 
per worker would help to sustain higher wage rates. An increased 
value of product per worker may be due to higher production of 
concrete commodities per worker or to higher prices of commodities 
produced or to both of these causes. It appears from an examination 
of data covering value of products per worker by geographic divisions, 
that there is at least association, if not the relationship of cause and 
effect, between high and low farm wage rates, respectively, and high 
and low average value of product per worker. From lowest to highest 
wage rates and from lowest to highest average values of agricultural 
products the geographic divisions maintain the same order. Whether 
the higher average value of products per worker causes the higher 
average wage rates, or only makes possible their existence, is a matter 
for argument which does not enter into the scope of this bulletin. 

In the period of nearly half a century under consideration, during 
which farm labor passed from abundance to scarcity, relative to the 
demand for it, there have been some changes in the areas of farm 
holdings, and it may be worth while to examine these in connection 
with the relative diminishing labor supply. Theoretically, the 
tendency is toward confinement to the labor of the operating 
family. 

In the North Atlantic States from 1880 to 19 10 there was a relative 
increase in the number of farms containing less than 50 acres, and a 
relative decrease in the number of farms containing 50 and under 500 
acres. The same general statement with small exceptions applies to 
the western group of states. 

1 Adapted from Bulletin Q4, Bureau of Statistics, United Stales Department of 
Agriculture, pp. 44~54, 7 2-73 • 



AGRICULTURAL WAGES 807 

In the North Central States there is no decisive tendency with 
regard to the relative number of farms containing less than 50 acres, 
but the decline in the relative number of farms containing 50 and 
under 100 acres is marked; and there is an increase in the relative 
number of farms containing 100 acres and over. 

It appears that in the South Atlantic States the number of farms 
containing less than 50 acres relatively increased steadily from 1880 
to 19 10, and the same is true of the class of farms containing 50 and 
under 100 acres. The contrary tendency is also observable for classes 
containing 100 acres and over. 

Relative increase in the number of farms containing less than 100 
acres is observable in the South Central division of states with a 
steady contrary tendency in the case of farms containing 100 acres 
and more. The two southern divisions of states are characterized 
by the same tendencies. 

In the average for the United States, the increase in the relative 
number of farms containing less than 50 acres, during the thirty years 
covered by the census, is fairly established. On the contrary, farms 
containing 50 and under 100 acres have declined in relative impor- 
tance. There was an increase of relative importance in farms con- 
taining 100 and under 500 acres from 1880 to 1890, after which there 
was a decline. The very large farms appear to be slightly increasing 
in relative importance, but these farms are hardly 3 per cent of the 
total number. On the other hand, the very small farms, or those 
containing less than 50 acres, are increasing in importance and now 
comprise more than one-third of the nation's farms. The intermediate 
farms, or those containing 50 and under 500 acres, have declined in 
relative number. 

It is interesting to turn to the great agricultural region in the 
North Central States. Improved area of farms in those states gained 
in average area from 80.59 acres in 1880 to 101.21 acres in 1900, 
but the average number of agricultural workers per farm remained 
about the same, while the average number of acres per agricultural 
worker increased from 50.4 acres in 1880 to 59.8 acres in 1890 and 
63.9 acres in 1900. 

Increase of improved acreage per worker is observable also in the 
South Central division from 1880 to 1890. There was an increase 
also in the South Atlantic division from 1880 to 1890, followed by a 
contrary tendency. In the North Atlantic and Western divisions 
there has been a marked tendency toward a smaller acreage per worker. 



808 AGRICULTURAL ECONOMICS 

Farm implements and machinery, in the use of which animal labor 
is employed, as well as that of men and women, have been the means 
by which the agricultural labor of the United States has enormously 
increased its productivity, and so made possible higher rates of wages. 
The value of implements and machinery on farms increased from 
$406,520,055 in 1880 to $1,265,149,783 in 1910, and each interme- 
diate census recorded an increase over the preceding one. It is true 
that the increase of value of implements and machinery on farms 
is not an accurate measure of increase in their number, for the reason 
that prices change, but it is a fact that the implements and machinery 
used in agriculture have steadily increased in efficiency and have 
constantly made human and animal labor applied to agriculture 
more productive. If prices have increased, the increased invest- 
ment of farms in implements and machinery implies an increasing 
dependence on these aids to labor and is an evidence of their economic 
gain in production. 

In pursuing the nineteenth investigation of farm wage rates 
throughout the country for Bulletin gg, many thousands of corre- 
spondents were requested to mention the special manner of farming 
and the special crops that enabled farmers to pay the higher wages 
and get the better laborers. The information received in response to 
this specific inquiry is not uniform and, indeed, cannot be so in a 
country possessing the great variety of agricultural and market con- 
ditions found in the United States. The general fundamental fact, 
however, is that the higher rates of wages in any community or larger 
region are sustained by the more intensive agriculture. This kind of 
agriculture embraces the more profitable lines of production in each 
community or larger area and probably the intensive methods are 
the cause of the profitable results. The intensive agricultural method 
carried on by intelligent men sustains a higher agricultural wage 
rate. 

The question was, "What special manner of farming and what 
special crops enable farmers to pay the higher wages and to get the 
better laborers?" 

The state statistical agent for Maine reported that this question 
would be answered differently for the different counties of the state, 
and that in Aroostook County the advantageous product is potatoes; 
in other counties where butter factories are in operation that dairying 
would be the favored specialty, while in still other counties it would 
be sweet corn for canning. In Vermont the higher wages are found 









AGRICULTURAL WAGES 809 

in market gardening, dairying, and fruit harvest; in truck farming, 
and dairy farming on a large scale in Rhode Island; while in New 
York the best fruit growers, particularly those who market their 
product at retail, truck farming, and the breeding of pure-bred stock 
were designated. 

The special agriculture that sustains the higher wages in New 
Jersey is fruit growing and general trucking; in Delaware, fruit 
growing combined with potatoes, both sweet and white; fruit growing 
and trucking in West Virginia. 

From the state statistical agent for South Carolina the answer is, 
"intensive diversified farming, planting of cotton, corn, and small 
grain, with hay and stock raising"; from Ohio the report is, "Diver- 
sified farming with well-planned rotations enables the farmer to 
employ help for the whole year; more intelligent laborers may be 
employed and higher wages paid." 

The situation is thus described in North Dakota: "Our grain 
farmers pay rather the higher wages, but our mixed farmers are 
better able to pay higher wages and they get the better men on 
account of their assurance that men and women will have work for 
the entire year." 

In Kansas, as well as in other states, wheat harvest pays the 
highest day rates of wages; otherwise the farmer who so manages his 
affairs as to be able to employ a man throughout the whole year is 
able to get the better quality of labor and must pay the highest rate. 

In Alabama, "the laborer, good, bad, or indifferent, prefers to 
cultivate corn and cotton." The rice laborer is paid the best wages 
in Louisiana for the reason that this crop requires more skilful laborers 
than others do ; the land is plowed with gang plows; disk harrows are 
used; the grain is seeded with seeders and then harvested with 
harvesters and binders. 

It is the observation of the state statistical agent for Washington 
that " fruit growing appeals to the men of a higher order of intelligence, 
and the competent man in this line is paid the best wages." In Ore- 
gon, dairying appears to secure the better laborers on account of 
steady employment, but the commercial apple growers also are able 
to pay higher wages, and perhaps as a class pay the highest. 

From every quarter the crop correspondents have observed that 
the higher wages and ability to select the better laborers are found 
on farms managed in the more intelligent ways and on which the 
cultivation is of the more intensive sort. 



810 AGRICULTURAL ECONOMICS 

257. SEASONAL DISTRIBUTION OF LABOR IN RELATION TO 

DEMAND 1 

By W. J. SPILLMAN 

The American farmer has seldom solved the problem of distribu- 
ting his labor through the year in such a way as to have it profitably 
occupied at all seasons. Many farmers who have attempted to follow 
a rotation have abandoned the effort. It is probable that the lack of 
regular rotations is partly due to the fact that some of the most 
important crops of the country, of which most rotations would 
naturally consist, compete strongly with one another in the matter 
of labor required at certain seasons of the year. For instance, in 
central latitudes the cultivation of corn is still in progress when wheat 
harvest begins, and timothy and clover, the principal hay crops of 
the country, demand much labor almost simultaneously with wheat 
as well as with oats. This makes it necessary to lay by the corn long 
before the proper season and requires an enormous amount of work 
during the latter part of June and the early part of July, but leaves 
the latter part of the summer poorly occupied. This renders necessary 
the hiring of extra labor in June and July, while at some seasons there 
is not enough work to keep regular labor profitably employed. 

One of the hardest problems the farmer has to face is that of labor. 
Reliable labor cannot always be had even under the best conditions. 
Where the cropping system is such as to require an excess of labor 
at one season and little or no labor at other seasons it is necessary to 
depend on transient labor, which is almost always of an undesirable 
character. In the North, where field work is precluded for a consider- 
able portion of the year, because of the long winter season, the prob- 
lem of finding employment for labor the year round has led to the 
extensive development of winter feeding and winter dairying. The 
winter feeding of beef cattle and sheep is particularly adapted to this 
purpose. Dairying solves the problem as far as the winter season is 
concerned, but it also consumes time in summer when field work 
is abundant and therefore does not balance up the work of the year 
quite as well as winter feeding does, though in many cases it may be 
more profitable. 

Many farmers have developed some form of employment as an 
adjunct to their farming operations in order to give regular employ- 
ment to their labor and thus be able to keep on hand dependable men 

1 Adapted from Yearbook of the Department of Agriculture, 1911, pp. 270-74. 



AGRICULTURAL WAGES 8n 

when they are needed on the farm. One farmer has a stone quarry 
which is worked only when the labor on the farm is not sufficient to 
give employment to the men. Other farmers make brooms in the 
winter and at odd times at other seasons. 

In the middle latitudes and in the South it is possible to plan 
cropping systems that will give regular employment to labor without 
these side industries. In this manner the area of land which one man 
or any definite number of men can farm is greatly increased. This 
means a larger yearly income per individual employed. Even if a 
crop grown returns a very small profit, if the work it demands comes 
at a season when the farmer would otherwise be idle, it adds just so 
much to the farm income without appreciably increasing the expenses. 
Other things being equal, those farms which have the largest variety 
of products to sell are the most profitable. The main reason for this 
is that these farms have a variety of interests that permit the farmer 
and his family and his hired labor to find profitable employment at 
all seasons of the year, while on farms with less varied interests there 
are frequently periods when there is no profitable employment. 

Speaking in a general way, a system of farm management which 
calls for approximately the same amount of labor at all seasons of 
the year not only greatly increases the area which a given force can 
farm, but, in many cases at least, increases the income of the farmer 
in approximately the same proportion. Hence, under most conditions 
it is wise for the farmer to follow a system that will give his labor 
permanent employment. There are instances where farmers delib- 
erately grow crops that are not profitable in order to keep their labor 
employed so that they will be at hand when needed on crops that are 
profitable, and this course appears to be justifiable under certain 
conditions. 

There are a few crops, such as cotton, and alfalfa in certain sec- 
tions, that of themselves furnish employment during nearly the whole 
year. This is one of the reasons why the single-crop cotton-growing 
system has been able to persist indefinitely in our Southern States. 
But even in the case of cotton a farmer can grow some winter hay 
and other crops to a considerable extent without decreasing the 
acreage of cotton he can manage, and thus increase considerably the 
area of land he can farm properly, as well as his annual income. 

So to plan the work of a farm as to distribute the labor equally 
throughout the year is no small task. The difficulty of doing so is 
attested by the small number of farms on which this task has been 



8 12 AGRICULTURAL ECONOMICS 

accomplished. The difficulty is increased by the irregularity of the 
seasons. In any case, the best that can be done is to make plans 
that are suited to a normal season and adjust them from time to 
time as the exigencies of the weather may require. 

In order to formulate a cropping system that will give a satis- 
factory distribution of labor during the season when field work is 
practicable, a wide acquaintance with crops and a knowledge of the 
dates of planting, tilling, harvesting, and all other operations con- 
nected with each crop are required. One must also know the amount 
of labor required for each of these operations, the number of men 
that must work together to accomplish the work economically, as 
well as the average percentage of days available for field work at 
different seasons of the year. If the work schedule is to include the 
care of live stock it is also necessary to know the amount of labor 
required for the various kinds of work as well as the seasons at which 
this labor must be performed. 

Occasionally one finds a farmer who has followed a system of 
farming long enough and has observed with sufficient care to enable 
him to know in advance just how much labor will be required during 
every part of the coming season. It is very seldom, however, that 
such a farmer has succeeded in filling in all the gaps during the 
season, so that on the vast majority of farms there are times when 
the need of labor is greater than the supply, while at other times 
little or nothing is to be done except the daily chores. So many 
unforeseen accidents interrupt the regular farm work, often bringing 
unexpected demands for time and labor, that it would not be possible 
to follow blindly any work schedule outlined in advance. At the 
same time it is possible to outline a plan that will serve well as a guide 
in the management of the farm. A little attention to this subject 
serves to show that the area which a given force can farm when the 
work is thoroughly systemized is very much greater than is generally 
supposed. 

258. MAKING LABOR GO AS FAR AS POSSIBLE 1 
By J. A. DRAKE 

Labor in itself constitutes one of the hardest problems encountered 
on the average farm. Not only is this now true, but the situation 
seems to be growing more serious each year. The cost of extra labor 

1 Adapted from Farmers' Bulletin 614, United States Department of Agricul- 
ture, 1-3. 



AGRICULTURAL WAGES 813 

is becoming greater, and efficient labor on the farm is more difficult 
to secure when needed most. Transient labor for the general farm 
is very unsatisfactory. As a rule, also, it is not convenient or profit- 
able to keep the necessary extra labor throughout the entire year, 
even if it were available. This condition must soon result in the 
reorganization of a large number of farms throughout the corn belt, 
and in other sections as well. The main features of these changes 
must be (1) a better distribution of labor throughout the entire 
season and (2) systems that will reduce the extra labor required at 
certain critical seasons of the year to a minimum. 

The average corn-belt farm must be devoted largely to the growing 
of staple field crops, such as can be planted and cultivated by machinery 
and handled on a large scale. There is little place in that region for 
crops that yield a big income per acre, such as truck crops and small 
fruits, except in a few localities close to cities, where good markets 
are available. The tendency in most sections is for the labor of the 
farm to be done by one man or by one man and his family. Occa- 
sionally it is done by the owner or tenant and a hired man. It is 
growing more imperative that the efficiency of one man be increased 
as much as possible in such operations as plowing, planting, and 
cultivating the farm crops, and that all the labor possible be eliminated 
in the harvesting of these crops, in order to cover a greater acreage 
effectively and at the same time to use the greatest economy in the 
employment of outside labor. 

Already this has given rise to certain well-formed and definite 
systems which include these elements as prominent features in the 
management of the farm. In several widely separated places prac- 
tically the same system has been worked out by farmers themselves 
as they have been forced gradually to meet present conditions. In 
all these instances 3- and 4-horse machinery is being rapidly substi- 
tuted for that of the 2 -horse type, in order to double the efficiency of 
each man employed. Crops are being grown that do not compete for 
labor. Live stock is being used in every possible way in the harvest- 
ing of the crops produced, thus eliminating to a very great extent 
the necessity of hiring extra labor. The system provides productive 
labor for practically the entire year and at the same time so dis- 
tributes this labor as to make it possible for one man, practically 
without hired help, to handle a large acreage (possible 240 acres), 
making a net income considerably greater than is at present com- 
monly obtained in the Corn Belt States. This system also rapidly 



814 AGRICULTURAL ECONOMICS 

increases the productiveness of the land and is designed to conserve 
soil fertility to the greatest possible degree. 

The system in itself is very simple. Only three different crops 
are grown, and these follow in a 4- or 5 -year rotation that is easily 
managed. The crops are corn, rye, and a mixture of clover and timo- 
thy, or clover alone, as is thought best. The ease with which the 
labor of such a rotation is taken care of is very evident. Corn is the 
first and only crop to receive attention during the spring and early 
summer until time to lay it by, at which time hay harvest begins. 
Since the rye is harvested later by the hogs, there is nothing to corre- 
spond to the wheat harvest, which always comes at about the time 
the corn crop should be given its last cultivation. Haying, then, is 
the only job to look after from the time the corn is laid by until it is 
necessary to cut corn or sow the fall grain, which in this case is rye. 
Thus the program is not crowded, and each crop can have its due 
attention without rushing or slighting any part of the work. This 
makes it possible for a given crew to handle the maximum acreage 
with the least possible expense for outside help, thus increasing the 
labor income. 

259. THE LABOR DEMANDS OF INTENSIVE AGRICULTURE 1 

By H. A. MILLIS 

The need of California farmers for an abundant supply of unskilled, 
cheap laborers results from the intensive character of the agricultural 
crops grown, the large scale on which these intensive crops are pro- 
duced, and the conditions under which they are marketed. The 
agricultural products of the state, in the growing of which there is 
much specialization, are practically all of them crops which at some 
stage in their production require a great deal of hand labor. They 
require either intensive cultivation and much care while growing or 
involve a great deal of hand labor in the harvest. This intensive 
agriculture is well illustrated in the cultivation of sugar beets. As 
soon as the beets develop two leaves they must be thinned by workers 
who cut out the surplus plants with a short-handled hoe and loosen 
the earth around each remaining beet. Later in the summer laborers 
are employed on two separate occasions to hoe the weeds from the 
growing beets, and in the harvest many hand workers are required 
for pulling, topping, and loading the beets upon wagons. The gather- 
ing of the grapes of the vineyards involves much labor, and after the 

1 Adapted from Reports of the Immigration Commission, XXIV, 6-8. 



AGRICULTURAL WAGES 815 

harvest the pruning of the vines requires hand workers. The citrus- 
fruit orchards demand more than the ordinary amount of cultivating, 
and in gathering the oranges and lemons a great many men are 
needed, for the picking and packing must be performed with care. 
Much labor is necessary also for the picking and packing of the 
deciduous fruit and for pruning the trees. In preparing such fruit 
for drying, the cutting and sulphuring gives employment to many 
more persons, especially women and girls employed in cutting. Beans 
must be hand-hoed once or twice during the summer, and later, in 
the threshing, many men are required. The growing of hops involves 
much hand labor in the pruning, stringing, and training of the vines, 
and later, a very much larger force is necessary for the picking. It is 
generally stated that where two men can do the plowing and culti- 
vating 50 men are required for the hand work of pruning, stringing, 
and training vines in the hopyards. A still larger number are needed 
during the short harvest season. Asparagus, celery, figs, and nuts 
also require extra hands for seeding, cultivating, or harvest. Straw- 
berries are one of the most intensive crops grown. Finally the irri- 
gation of fields and orchards requires considerable care and many 
men are employed for that work alone. 

The matter of securing an adequate number of laborers to perform 
all of the intensive handwork required in connection with these crops 
is the more difficult because of the specialization of most communities 
in one or more of these crops, the seasonal character of the work, and 
the temporary demands in allied industries at the same seasons, and 
because the supply of laborers permanently located in these districts 
is hardly adequate to supply the need of regular farm workers and 
temporary laborers in canneries and packing houses in the towns. 
Because of their climatic conditions, soil, and topography certain 
districts in the state are best adapted to certain of these crops, and 
the majority of farms of these districts specialize in the one or more 
intensive crops to which they are best adapted. Any one of these 
specialized branches of agriculture does not as a rule require many 
laborers throughout the year, but only certain processes at various 
stages of growth make an urgent demand for workers, and in a dis- 
trict specializing mainly in one crop this demand for large forces of 
men on many ranches comes within a short period of time. Not 
only do the farms require these additional workers for the short 
harvest seasons, but dependent upon many of these products there 
are also factories and canning and packing establishments, which 



816 AGRICULTURAL ECONOMICS 

require extra laborers to operate them at the same season in order 
to handle the crop as harvested. The towns in these agricultural 
districts are usually small, and their surplus labor supply is employed 
almost entirely in these allied establishments. The specialization of 
most agricultural communities limits the demand for many laborers 
to short seasons, and there are usually no other industries to keep 
many extra men there after the seasonal ranch work and canning, 
and packing-house work are finished. 



C. Forces Affecting the Supply of Agricultural Labor 

260. SOME FACTORS CURTAILING THE SUPPLY OF 
AGRICULTURAL LABOR. 1 

By ALFRED H. PETERS 

There is a marked disaffection on the part of a growing number 
of eastern-born men and women toward agriculture as a vocation. 
The slow and moderate return upon capital invested in agriculture 
is one cause of this disaffection. Whosoever follows any vocation 
solely for the amount of money it may yield, can exercise his powers 
to that end in many other ways better than in agriculture. The 
Hebrew, that unerring scenter-out of gain, never is a husbandman. 
The homage paid to wealth in the Northern United States for the 
last quarter of a century has turned into the ways most productive 
of gain the greater part of those young men whose career is generally 
determined by the common ideal. 

Another cause of disaffection toward the agricultural life is its 
isolation. The young people envy the easier intercourse of the town, 
think their own life dull, and want to live where it is not so lonesome. 
The day laborer in a great town may fare better, find better schools, 
and, dearest of all, behold a thousand times more of the passing show 
than the small agricultural proprietor in a remote country region. 
A man who had served at different times as valet, waiter, barber, 
usher, and what not, was heard to say that, in case of need he would 
do anything except work on a farm. It was living, as he would have 
said, "out of the world," away from the novelty and fashion and 
excitement — the only world he could appreciate. 

A further cause of disaffection toward the agricultural life is the 
growth among us of physical squeamishness and tenderness of the 

1 Adapted from the Quarterly Journal of Economics, IV (October, 1889), 27-30. 



AGRICULTURAL WAGES 817 

person — a disposition to avoid contact with nature in the gross, with 
whatever is sharp or rank or rugged. It is probable that more young 
Eastern and Middle States countrymen today would rather hire 
themselves out to stand behind counters, or to sit in boxes selling 
tickets, than to become foremen to farm proprietors at the same 
remuneration, or even to become small farmers on their own account. 
This is not from an aversion to physical exercise. These same young 
clerks and ticket-sellers are, most likely, members of some boat club 
or gymnasium. It is largely because of the more polished appearance 
which they are enabled to affect, and a readiness to endure those 
things which offend man's spirit, rather than those things which 
offend his body. 

Still another cause for the dissatisfaction toward agriculture as a 
vocation is the decreased importance of the agricultural population, 
socially and politically, as compared with the members of other 
callings. The farmer's local influence is less than that of the trader 
or manufacturer or contractor. He who in numbers and in the pro- 
portion of his taxes is first is, for all purposes of official distinction, 
considered the least. All roads toward distinction lead away from 
the farm. Aware of his diminished consequence in the world of 
politics and affairs, the farm proprietor emulous of distinction, if 
unable to forsake it itself, desires that his sons shall follow almost 
any other calling than his own. 

261. THE COMPETITION OF NON-AGRICULTURAL 
EMPLOYMENTS 1 

By GEORGE K. HOLMES 

Farm labor in this country has presented the problem of a dimin- 
ishing supply relative to population since the days of original settle- 
ment. It is the old familiar feature of the industrial nations of the 
world. Until recent years the problem was almost entirely confined 
to the quantity of the supply, but during the last decade or two it 
has assumed a new phase in which not only the amount of the supply 
relatively has almost critically declined, but the quality has almost 
absolutely declined, or has failed in an important degree to keep 
pace with the need for labor, more skill, and more intelligence. 

In spite of all that the farmer has done or been able to do, there 
has been a drift of labor from farm to city and industry, and the 

1 Adapted from Bulletin 94, Bureau of Statistics, United States Department of 
Agriculture, pp. 38-41. 



818 AGRICULTURAL ECONOMICS 

potential supply of farm labor has been diverted from the farm. The 
movement of farm labor to town and city, and to industry and 
transportation, is to be accounted for quite as much by the student 
of psychology as by the student of economics. To the farm laborer 
who has been in the city little if at all, there is a glamor in city life 
which has a powerful influence upon his volition. The case is similar 
to that of the boy who runs away from home to hunt Indians. When 
this is joined to the greater nominal rate of wages that can be earned 
in the city, the combination of a little reasoning with a good deal of 
imagination is likely to rob the farmer of his hired man. 

When employments are competitive, their wage rates must be 
competitive. Many an agricultural laborer can become the conductor 
or motorman of a street, suburban, or interurban electric car; he can 
find employment in numerous directions in the near-by town or city, 
or shop or factory. If the farm does not meet the competition of 
other employments, it must suffer the loss of some of its laborers. 
This in fact is what has happened in this country. The farm has lost 
laborers and has been unable to obtain laborers because it has not 
met the wages of competitive employments. The effort of the farm 
to meet the competition for its labor is often apparent within a rim of 
country surrounding cities of considerable size. In the nineteenth 
investigation of the wages of farm labor made by this Bureau, the 
farm wage rates of counties containing cities of more than 25,000 
population are compared with wage rates in the rest of the state. The 
difference between the farm wages of such counties and the rest of 
the state is sometimes small and is often higher in such counties, but 
not everywhere so. In case of a lower wage rate in a county containing 
a city of 25,000 persons or more than in the rest of the state, it may 
be that the sort of labor required by the farms in such county is not 
of as high an order as that required by farms in the rest of the state. 

262. GETTING THE IMMIGRANT ON THE LAND 

a) THE EFFORTS OF THE BUREAU OF IMMIGRATION 1 
By T. V. POWDERLY 

Up to the present time the laboring population of Europe has 
been in ignorance of the resources of the United States; today the 
principal information on which foreign workmen emigrate to the 

1 Adapted from Report of the Chief of the Division of Information, Bureau of 
Immigration and Naturalization, Department of Commerce and Labor, 1908, p. 275, 
and 1909, pp. 329-30. 



AGRICULTURAL WAGES 819 

United States comes from the large cities and mining and manu- 
facturing centers of the Union. The popular impression among the 
workmen of Europe is that the United States is one of four things — a 
city street, the bed of a railroad, a factory, or a coal mine. That 
there are fertile acres in the United States on which men may settle 
and thrive is not generally known among the workmen of Europe, 
and as those previously admitted have contented themselves with 
working upon the streets, along railroads, in factories, or in mines, 
their correspondence with friends at home in the old country naturally 
induces others to come to these places. Under the direction and work 
of the Division of Information and Distribution of the Bureau of 
Immigration this condition of affairs must ultimately change, for 
every man directed to a congenial place on a farm, every man who 
becomes the possessor of a farm, every tenant, and everyone who 
shares the profits of a farm will become a missionary and in corre- 
spondence with friends in Europe will inform them that our resources 
do not consist solely of opportunities heretofore named, and in time 
the tide of immigration must turn away from the congested centers 
to the land. 

This effort to divert the tide of immigration to agricultural sections 
of the country is of doubtful value unless conditions are favorable. 
Soil and climate should be suitable, the latter approximating to that 
of the home of the immigrant, the former not only fertile but adapted 
to crops like those the immigrant, if a farmer, was accustomed to 
raising at home. Likewise, so far as possible, those who do not speak 
English should be directed to localities where others of their race 
have settled. Intensive farming is better understood by alien land 
workers than any other, and for that reason many small farms with 
good transportation facilities and near-by markets are more attractive 
than large holdings. Among aliens, those coming from Northern 
Europe are preferred by perhaps a majority of applicants for farm 
labor. As the vanie of the Southern European as a fruit grower 
becomes known, the demand grows in volume. 

The difficulty in securing labor at harvest time to gather in the 
crops on large farms, which has embarrassed the owners, or managers, 
and which was seriously acute the last two seasons, has given rise 
to a movement in favor of cutting up large farms into smaller holdings, 
each one capable of supporting a family in comfort and more likely 
to find a man desirous of owning and operating it himself than one 
who would prefer working on a large farm for another, or on shares- 



820 AGRICULTURAL ECONOMICS 

That many owners of large holdings are considering the advisability 
of dividing their acreage into small farms is the information that 
comes to the division, and it regards this movement as in the right 
direction and calculated, if carried out, to result favorably to the 
settler — whether citizen or alien — as well as the country at large. 

Such results as have accrued in the way of distribution are trace- 
able to a genuine demand for laborers in the agricultural sections. 
Employers were not only ready to co-operate with the Division 
to the extent of submitting applications, but were willing in many 
instances to advance transportation. The Division is satisfied that, 
apart from ignorance of our language on the part of a large number 
of immigrants, and the want of transportation money, the principal 
drawback is the lack of understanding on the part of newcomers 
regarding our agricultural resources, methods of farming, and advan- 
tages to be derived away from the crowded cities. It was with a full 
realization of the need for distribution that Congress created the 
Division of Information, and its importance, now that prosperity 
will swell the tide of immigration, is augmented. Success in large 
measure can only come by slow growth and experience gained through 
persistent effort. All things considered, the Division has, so far, 
performed its work well. The good it has done outweighs the criti- 
cisms, many of them made in ignorance of facts, and the benefits 
conferred on employer and employee entitle it to consideration and 
support. 

b) THE IMMIGRANT'S WELCOME 1 
By SAMUEL GOMPERS 

In the South prevalent sentiment doubts the desirableness of 
the immigrants now arriving in America, though two or three of the 
states have taken up with "distribution." In Louisiana, the New 
Orleans press for the last few months has been giving much space 
to the new immigration station, the plans for which have been 
approved by the authorities at Washington. A Louisiana immigration 
and development league has been proposed, but it was announced 
by the New Orleans States that it would "probably not take shape 
until the Hamburg- American Steamship line definitely announced 
its purpose to come to New Orleans." To the New York Observer 

1 Adapted from "Schemes to Distribute Immigrants," Senate Document 
No. 21, 63d Cong., 1st sess., pp. 12-13. Reprinted from American Federationist , 
July, ion. 



AGRICULTURAL WAGES 821 

the immigration at present to the Gulf States seems significant. In 
1 9 10 Tampa had 5,386 alien arrivals; Miami, 1,787; Key West, 
2,457; Galveston, 4,996; and New Orleans, 3,604, with only a few 
hundreds in all at other ports. 

In the other Southern States the " nation-wide patriotic and 
philanthropic movement for the distribution of immigration" is not 
being welcomed. Texas would have to repeal one of the provisions 
of its constitution before it could establish a state immigration 
bureau. The Missouri legislature in Feburary threw out the appro- 
priation for the state board of immigration, and Kansas City, St. 
Louis, and other cities of the state will lose $25,000 advanced by 
them during the last two years for the support of the board. Georgia, 
through a convention of its Farmers' Union, which has 80,000 mem- 
bers, decided a few months ago that it wants no immigrants. In 
Mississippi the Farmers' Educational Co-operative Union passed 
resolutions in July, 1908, declaring its members "irrevocably opposed 
to the present tide of undesirable immigration now pouring into this 
country." North Carolina, through its bureau of labor, made a 
canvass of its possible need of immigrants and it found a strong 
opposition to the inducement or distribution of foreign cheap labor. 
South Carolina five years ago established a state bureau of immi- 
gration, appropriated considerable money to it, and, with a fund 
raised among cotton mill owners, real estate dealers, and others 
pecuniarily interested, its commissioners went abroad and brought 
two shiploads of immigrants from Belgium, and distributed them to 
the number of 762 to various places, but in two years few if any of 
these induced immigrants were to be found in the state. Conse- 
quently, March 4, 1909, a law was passed forbidding a state official 
"to attempt directly or indirectly to bring immigrants into the state 
of South Carolina." Virginia and North Carolina, which for a time 
had been taken in with South Carolina on the distribution scheme, 
after a brief experience suppressed their share in it by refusing to 
appropriate any more funds for the purpose. 

The sentiments and views of the farmers, the small business men, 
and the wage workers of the South were thus expressed by T. J. 
Brooks, representing the Farmers' Educational and Co-operative 
Union before the Congressional Committee on Immigration and 
Naturalization, March 8, 1910: 

The only demand for foreign immigration throughout the agricultural 
districts of the South and West comes really from the transportation 



822 AGRICULTURAL ECONOMICS 

interests, that wish to develop traffic; real estate boomers, hoping to sell 
land thereby; the large employers, always demanding cheap labor; and 
certain other financial and gambling interests, anxious to prevent the 
farmers from properly controlling the production and marketing of their 
crops sufficiently to secure a fair and reasonable price. 

Speaking for Mississippi, the Jackson Farmers' Union Advocate 
has this: 

If some good people from the northwestern part of the United States 
want to come down here, they will come, and we will welcome them if 
they take to us, our ideas about local matters such as the negro; but we 
do not favor a state movement to get them, nor the expenditure of state 
funds to attract them; because just as sure as that once gets started it will 
not only bring in some we don't want, but there will be a demand on the 
part of some to turn it to bringing in the foreign immigrant. 

D. Nominal Wages and Real Wages 

263. REAL WAGES OF THE FARM LABORER 1 
By GEORGE K. HOLMES 

Rates of wages do not express the real wages often received by the 
farm laborer in this country. There were various extras apart from 
board. He may receive, without any money reckoning as to value, 
the use of dwelling and garden, stable for cow or horse; feed for cow, 
horse, swine, or poultry; pasture for cow, horse, or swine; butter, 
eggs, milk, fruit, vegetables for family use; firewood for his dwelling 
and the use of a team to haul it; the occasional use of a team for 
hauling for other purposes; the laborer may receive in addition to 
his rate of wages one meal a day, or laundry service, or occasional 
use of horse and buggy. 

All of the various extras or allowances in addition to rates of 
wages are not made to the same laborer, nor is any one or more 
of these allowances made to every laborer, but the general fact is 
that these allowances as made in practice amount to a considerable 
addition to the money rate of wages. 

The Commissioner of Labor of Michigan investigated this subject 
in 1895 and found that, of 4,412 farm laborers, 26.7 per cent received 
the use of dwelling in addition to money wages, 23.3 per cent received 
fuel, 19.9 per cent cow pasture, 24.5 per cent had the benefit of use 

1 Adapted from Bulletin gg, Bureau of Statistics, United States Department 
of Agriculture, pp. 49-53. 



AGRICULTURAL WAGES 823 

of team, and 28.4 per cent had a garden plot. The Michigan bureau 
determined that the average monthly value of such allowances was 
$6.22 per laborer. 

From investigations made by this bureau it appears that the 
average monthly value of the dwelling, garden, and other appurte- 
nances, the use of which was a part of the real wages paid without 
board, ranged from $1.75 to $5 in the United States, and the amount 
when wages were paid with board ranged from $1 to $4.50. The 
average value of feed for animals kept ranged from $1.11 to $3.11 
per month; pasturage from 65 cents to $1.61; fire wood from $1.06 
to $2.39; the occasional use of team for hauling was valued at 48 cents 
to $1.70, and the occasional use of horse and buggy, probably reaching 
as high a frequency as weekly use, ranged from 87 cents to $2.37. 

The estimated value of the fruit given to the family of the laborer 
was reported to be worth from 80 cents to $1.64 per month; the 
value of the stabling for the laborer's horse, if he had one, was esti- 
mated to be 45 cents to $2 per month; and the laundry service for 
the laborer was reported by correspondents to range from 75 cents 
to $2 a month. 

What all of the extras or allowances given to each laborer on the 
average were worth it was impossible to ascertain. The reports 
secured, however, are sufficient to indicate a considerable addition 
on this account to the money rate of wages. 

Another element of real wages remaining to be considered is their 
purchasing power, and for this purpose Table 27 has been constructed 
to compare workingmen with farm laborers. It is entirely a table 
of index numbers. The purchasing power of the wages of working- 
men is measured by the retail prices of food. The mean for the years 
1 890- 1 898 is represented by 100. For concise comparisons, the entire 
period of years has been divided into two periods and a mean for 
each of the two periods has been computed; the mean for the former 
one, 1890-1898, being, as stated, 100. The second period includes 
the years 1899- 1907. 

The index number for 1890-1898 being 100, the number repre- 
senting the full-time weekly earnings for workingmen in the period 
1899-1907 is 1 1 1.2. The index number for the latter period for the 
wage rate of the outdoor labor of men on farms per month in hiring 
by the year and season is 121; the rate per day for day labor on the 
farm in harvest work has the index number of 122.5; and the rate 
for day labor other than harvest work has the index number of 120.0. 



824 



AGRICULTURAL ECONOMICS 



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AGRICULTURAL WAGES 825 

These comparisons establish the conclusion that the money wage 
rates of farm labor have increased during the eighteen years covered 
in a considerably greater degree than the wages of workingmen in 
non- agricultural occupations. 

In the purchasing power of wages in terms of retail prices of food 
the workingmen barely gain from the first period to the second, the 
mean index number for the second period being 101.4. For the farm 
laborer the gain was from about 10 to 15 per cent, so that, notwith- 
standing the great rate of increase of retail prices of food, the rates 
of wages of farm labor increased in degrees sufficient to make as a 
net result a substantial rate of increase. The subject may be examined 
in detail by referring to Table 27. 

264. THE FARM FURNISHES A LIVING IN ADDITION TO 
OTHER INCOME 1 

By W. C. FUNK 

According to the Thirteenth Census, approximately 32 per cent of 
the population of the United States are actually living on farms. 
Most of these depend upon the farm for their livelihood. Some 
studies have already been made to determine the labor income of 
farmers in various sections, but this income is exclusive of what the 
farm furnishes in food, fuel, and house rent. The farm should be 
credited with the indirect income it furnishes to the farmer's family 
in products and in the privilege of the use of the house. 

This indirect income from the farm is often underestimated by the 
farmer or merely taken for granted and its real value not appreciated. 
The person whose vocation demands that he live in the city has to 
pay a large proportion of his income for those things which the farmer 
receives without any cash outlay. 

This bulletin considers the amount the farm should be credited 
with for that which it furnishes to the farmer's family in products and 
in the privilege of the use of the farmhouse. In the group of items 
studied, however, data are presented covering the amount purchased, 
as well as that furnished by the farm. 

Studies were made in 10 localities, covering 3 cotton-growing, 2 
corn-belt, 2 general-farming, and 3 typical dairy sections. 

The average annual value of food, fuel, oil, and shelter per person 
for the families visited was $129.74, of which $91.97 was furnished 

1 Adapted from Farmers'' Bulletin 635, pp. 1,21. 



826 



AGRICULTURAL ECONOMICS 



directly by the farm and $37.77 purchased. The average value per 
family was $595.08, of which $421.17 was furnished by the farm and 
$173.91 purchased. 

The average cost of the food consumed per person was $89.23. 
Of this food 63 per cent was furnished by the farm. 

The quantity of fruit and vegetables used is in direct proportion to 
the quantity raised on the farm. It was also found that the grocery 
bill was reduced where increased quantities of fruit and vegetables 
were grown for home use. 

The average annual value of the use of the farmhouse was found to 
be $125 per family. The value of the dwelling is generally considered 
a part of the value of the farm and is thus furnished free for the use 
of the farm family. The importance of this is fully appreciated by 
the family in the town or city paying house rent. 

The average cost of board for each person, that is, the value of the 
food and its preparation, was $10 a month. The cost of board and 
lodging was $14.62. Of this sum, on the average only 22 per cent was 
paid out in actual cash by the farmer. 

The result of these studies shows that the farmer's cost of living in 
actual cash expenditures is very materially reduced by what the farm 
furnishes in food products, fuel, and house rent; in fact, the income 
from this source adds as much to the real wealth of many farmers as 
does the net income from the sale of farm products. 

If it were not for those products contributed by the farm without 
any actual cash expenditure, a great many farmers would not have 
a comfortable living. Extensive investigations relative to the profits 
in farming indicate that the average labor income of the farmer prob- 
ably differs little from ordinary farm wages, but in addition to this, 
he has the products contributed by the farm, as discussed in this 
bulletin. 



265. THE FARMER'S PURCHASING POWER 1 
By VICTOR H. OLMSTED 

In my report of 19 10 I showed that the value of 1 acre of the 
farmer's crops in 1909 was 72.7 per cent more than in 1899; that the 
cost of articles purchased by farmers had increased about 12.1 per 

1 Adapted from Report of the Chief of the Bureau of Statistics, United States 
Department of Agriculture, 1911 and 1912, and the Agricultural Outlook, December, 
1914. 



AGRICULTURAL WAGES 



27 



cent; and, consequently, the purchasing power of the produce of 1 
acre in 1909 was about 54 per cent greater than the purchasing power 
of the produce of 1 acre in 1899. This statement is in harmony with 
reports recently issued by the census relating to farm values; accord- 
ing to census reports land values have increased 109 per cent from 
1900 to 1910. 

The census of 19 10 was taken at a time when farmers were in the 
zenith of their prosperity. For several years preceding crops were 
good and sold well. This is shown in the following table, which gives 
the average value per acre yearly since 1866 of 10 crops combined 




i 1 1 m i 1 i 1 i i 

Chart showing value of the produce of i acre (wheat, corn, oats, barley, rye, buckwheat, potatoes, 
tobacco, hay, and cotton) combined, for qs per cent of area of full crops. 



(wheat, corn, oats, barley, rye, buckwheat, potatoes, hay, cotton, 
tobacco) ; they include about 95 per cent of the total crop area of the 
United States, and closely approximate the average value of all crops. 



YEARLY VALUE PER ACRE OF 10 CROPS COMBINED 



1910 
1909 
1908 
1907 
1906 

1905 
1904 
1903 
1902 
1901 
1900 
1899 



$15 


49 


16 


42 


15 


32 


14 


74 


13 


46 


13 


28 


13 


26 


12 


62 


12 


07 


II 


43 


IO 


3i 


9 


13 



1898 

1897 

1896 

1895 

1894 
1893 



1891 
1890 

1889 
1888 
1887 



$9.00 

9.07 

7-94 
8.12 
9.06 
9- 50 



>2 IO.IO 



II.76 

II.O3 

8.99 

IO.3O 

10. 14 



1886 
1885 
1884 
1883 



$9.41 
9.72 

9-95 

10.93 



1882 12.93 

1881 1310 

1880 1301 

1879 I 3- 2 ^ 

1878 10.37 

1877 12.01 

1876 10.80 

1875 12.20 



1874 

1873 

1872 

1871 

1870 

1869 

1868. 

1867 

1866. 



$13 
14 
14 
15 
15 
14 
14 
15 
14 



828 AGRICULTURAL ECONOMICS 

The table shows that from the year of greatest depression, 1896, 
to 1909, there was a practically constant yearly increase in value of 
the output of an acre of produce, the total increase from $7.94 to 
$16.42 being nearly 107 per cent. In 1910 there was the first reduc- 
tion from the preceding year since 1898 — a reduction from $16.42 
per acre to $15.49, equivalent to 5.7 per cent; however, values per 
acre in 19 10 were 69.7 per cent higher than in the census year 
of 1899. 

Although the aggregate production of crops in 191 1 was about 
6.3 per cent smaller than 19 10 and 0.5 per cent smaller than in 1909, 
the total money value of crop production in 191 1, by reason of 
enhancement in prices, was about 2.1 per cent greater than in 1910 
and 3 per cent greater than 1909. According to a report of the Bureau 
of the Census, the value of all crops in the United States in 1909 
was about $5,487,000,000; on this basis it is estimated that the money 
value of all crops in 1910 was about $5,537,000,000, and of crops 
in 191 1, $5,654,000,000. 

The money value of 1 acre of produce in 191 1 averaged about 
$15.48, as compared with $15.50 in 1910, $15.99 m i 9°9j an d $9 48 
in 1899. The larger aggregate value of crops in 191 1 than in 1910 
and 1909 was due to increased acreage in conjunction with enhance- 
ment of prices. 

The estimates here given are based upon data received for crops 
covering about 90 per cent of the area of all field crops and may be 
assumed to be representative of all crops. 

An investigation of prices of about 85 articles generally purchased 
by farmers indicates that such articles averaged in price in 191 1 
about 1.1 per cent higher than in 19 10, 2.6 per cent higher than in 
1909, and about 15.3 per cent higher than in 1899. 

Taking into consideration the variation in the price of things 
which farmers buy and in the things which farmers sell, it appears 
that the purchasing power of 1 acre of crops in 191 1 was 1.2 per cent 
less than in 1910, 5.7 per cent less than in 1909, and 41.6 per cent 
greater than in 1899. 

The purchasing power of 1 acre of corn in 191 1 was 9 per cent 
greater than in 19 10, 4.1 per cent less than in 1909, and 50.7 
per cent greater than in 1899. 

The purchasing power of 1 acre of wheat in 191 1 was 11.7 per 
cent less than in 1910, 29.8 per cent less than in 1909, and 30.2 per cent 
greater than in 1899. 



AGRICULTURAL WAGES 829 

The purchasing power of 1 acre of cotton in 191 1 (excluding value 
of the seed) was 20.6 per cent less than in 1910, 10.2 per cent less than 
in 1909, and 32.3 per cent more than in 1899. 

Upon the basis of the purchasing power of the value of 1 acre of 
produce, the year 1909 stands as the most prosperous of recent years 
and, apparently, the most prosperous for farmers of the past fifty 
years for which there are records. 

In 1 9 13 the value of 1 acre of the farmer's crops averaged about 
1.2 per cent higher than in 1909, whereas the value of articles bought 
by the farmer had advanced in the same time 5.7 per cent; conse- 
quently as a result of the greater increase in the price of what the 
farmer buys than what he sells, the actual purchasing power of 1 
acre of the farmer's produce was about 4.3 per cent less than in 1909. 
There was a material increase in the purchasing power of farmers 
from 1896 to 1909, but since 1909 there has been a check to this rapid 
increase, with some reaction downward. 

E. Data from American Farms 

266. WAGE RATES OF AMERICAN FARM LABOR 1 
By GEORGE K. HOLMES 

Nineteen times this Bureau has investigated the wage rates of the 
labor of men on farms throughout the United States, beginning with 
1866 and ending with 1909, a period of forty-four years. These 
investigations have all ascertained wage rates, not only for all the 
states in existence at the time, but also for the nation as a whole. 
The aim has been to learn the customary rates of farm wages in every 
neighborhood in the United States and to combine these rates arith- 
metically, so as to make general averages for the several states, for 
the geographic divisions of states, and for the United States. 

Monthly rates of wages for outdoor labor at four of these dates 
is shown in Table 13. 

Turning now to the rates of wages which were paid for day labor 
in harvest work and for labor other than harvest work, without and 
with board, the following statement can be made for the four classes 
of wage rates per day for the 19 investigations: 

For day labor in harvest work, with board, the rate per day in 1866 
was $1.04, and the amount rose to $1.18 in 1874 or 1S75. A decline 

1 Adapted from Bulletin gg, Bureau of Statistics, United States Department of 
Agriculture, pp. 7, 31, 35, 37"39> 49- 



8 3 o 



AGRICULTURAL ECONOMICS 



TABLE 13 

Average Wage Rates of Outdoor Labor of Men on Farms, per Month in Hiring by the 

Season, without and with Board, by States and Geographic Divisions, 

4 Investigations in 1866, 1869, 1875, and 1909 

[Currency years 1866 to 1875 in gold] 



State and Geographic 
Division 



Without Board 



1866 



1869 



1874 

or 

1875 



With Board 



1866 



1869 



1874 

or 

187S 



Maine 

New Hampshire. 

Vermont 

Massachusetts. . 
Rhode Island . . . 
Connecticut. . . . 

NewYork 

New Jersey _ 

Pennsylvania. . . 

Delaware 

Maryland 

Virginia 

West Virginia. . . 
North Carolina.. 
South Carolina.. 

Georgia 

Florida 

Ohio 

Indiana 

Illinois 

Michigan 

Wisconsin 

Minnesota 

Iowa 

Missouri 

North Dakota . . 
South Dakota. .. 

Nebraska 

Kansas 

Kentucky 

Tennessee 

Alabama 

Mississippi 

Louisiana 

Texas 

Oklahoma 

Arkansas 

Montana 

Wyoming 

Colorado 

New Mexico. . . . 

Arizona 

Utah 

Nevada 

Idaho 

Washington 

Oregon 

California 



Geographic division: 
North Atlantic... 
South Atlantic . . . 
North Central . . . 
South Central . . . 
Western 



$22.36 
27.54 
26.36 
29.29 
28.16 
27.92 
24.56 
2332 
24.01 
18.48 
16.78 
12.12 
20.66 
10.69 
9.86 
12.99 
14-47 
22.84 
22.18 
23.30 
24.60 
2510 
27-03 
23.40 
21.71 

>22.53 

32.68 
25.63 

16.76 

15-49 
11-53 
I5-90 
15-66 
16.71 



$22.76 
29.24 
28.63 
30.10 
27.90 
28.27 
25.18 
25.24 
24.23 
18.36 
18.14 
13-09 
18.96 
11.00 
9.89 
12.97 
15- 60 
23-33 
22.37 
22.79 
24.97 
24.96 
25.58 
24.70 
21.84 



28.14 
24-57 
1567 
14.33 
12.90 
14.74 
19.88 
15-54 



20.85 



19-93 



79.16 
30.00 



58.22 
85.00 



60.50 
41.60 
50.00 



$25-39 
30.14 
28.37 
33-39 
30.36 
31-22 
27.24 
32.74 
26.02 
21.25 
19-31 
14.15 
20.29 
13 16 
12.64 
14.28 
16.91 
22.96 
24.67 
24.89 
27.84 
25.47 
26.58 
24.07 
19.84 

32.38 

24.50 
22.38 
18.48 
15.96 
14-53 
16.48 
16.26 
20.10 



20.21 
49.00 
52.47 
36.31 
20.60 



37-29 



41.91 



36.13 
34-91 
45-27 



$38.44 
38.92 
37-44 
44-17 
46.17 
38.67 
35- 00 
33 69 
30.57 
26.32 
24.56 
22.25 
28.75 
20.21 
16.36 
18.91 
27.20 
29.58 
28.77 
31-77 
33-92 
38.22 
39-79 
36.77 
28.23 
(46.93 
\4i.52 
38.65 
35-34 
23.31 
21.02 
19.29 
20.37 
19-93 
25.77 
29.05 
23-25 
55.o8 
44-75 
46.61 
34-68 
49.01 
57-00 
56.23 
52.64 
49-25 
44.81 
47-79 



$16.24 
20.01 
18. II 
19-59 
18.54 
19.92 
17.08 
16.74 
16.10 
10.74 
10.97 
8.51 
14.92 
7.04 
6.66 
8.50 
10.18 
16.30 
15.84 
16.40 
17.00 
17-32 
19.13 
16.77 
15.25 
15-49 
22.08 
17.92 
12.01 
11.69 
7-74 
11.83 
12.91 
11.80 



I3-70 



50.00 
25.00 



3»-4i 
70.00 



44 -50 
29.00 
34-39 



$15-74 
21.39 
20.03 
20.37 
18.72 
18.72 
16.92 
16.50 
16.31 
12.85 
11.23 
9.21 
12.94 
7.38 
7.20 
936 
10.28 
15-95 
15-28 
1562 
17-88 
16.76 
17.28 
16.48 
15.65 



18.87 
16.70 
10.93 
10.24 
9-32 
12.38 
13-55 
12.46 



13.70 



26.62 



$17.83 
20.38 
19.03 
20.16 
19-51 
20.16 
18.63 
17.67 
16.05 
13-3° 
11.68 

9.71 
13.98 

9-25 

9. II 
10.12 

9.19 
16.87 
16.91 
16.87 
19.08 
17.39 
18.04 
16.91 
14.16 

21.25 

1592 
14.87 
12.88 
10.87 
10.45 
11. 71 
10.87 
1437 



1561 
35.56 
38.81 
21-37 
13.01 



28.62 



28.19 
25-33 

31-22 



25.19 
12.41 
2339 
15.25 
47.06 



25.96 
I2.70 

23-49 
15-32 
41.91 



28.31 
14.42 
24.07 
16.92 
40.68 



35-H 
20.86 
33-64 
22.48 
48.04 



17-45 
8.33 
16.50 
11.09 
33 05 



17.58 
8.86 
16.15 
11.32 
26.62 



18.25 
9-94 
16.75 
11.98 
29.10 



$27.60 
26.33 
26.86 
2930 
26.38 
26.39 
26.00 
22.06 
20.72 
17-36 
16.81 
16.01 
21.01 
14.69 
12.66 
13.72 
18.49 
22.11 
22.15 
25.09 
25.10 
28.57 
29.25 
28.93 
2I.IO 
1 33- 34 
\3i-46 
28.28 
25-83 
18.00 
15 -70 
13-78 
14.82 
14-37 
19.07 
21.42 
16.82 
39-29 
35- 60 
32-57 
26.11 
36.10 
4I-36 
40.83 
40.45 
36.39 
34-03 
34-93 



24-56 
15-13 
25-42 
i6.57 
35-32 



United States. 



18.08 



18.06 



19.60 



28.22 



12.69 



12.65 



13-53 



20.80 



followed, and it was not until 1 88 1 or 1882 that the amount rose above 
the previous highest figure and reached $1.20 per day. Again there 



AGRICULTURAL WAGES 



831 



was a decline, which lasted until 1899, during which period the rate 
declined as low as 96 cents in 1895. The rate for 1902 was $1.23; 
for 1906, $1.45; and for 1909, $1.43. 

The geographic divisions of states take their customary order in 
the rates of day wages for day labor in harvest work. The rate in 
1909 in the Western States was $2.02; in North Central, $1.87; in the 
North Atlantic, $1.62; in the South Central, $1.10; and in the South 
Atlantic, $1.03. 

For day labor other than harvest work, with board, the rate in 
1866 was 64 cents in the United States. It reached 68 cents in 1874 
or 1875, and declined during the industrial depression of the seventies, 
so that the subsequent increase reached 70 cents in 1881 or 1882. 
From that year to 1898 the rate of day wages for labor other than 
harvest work, with board, remained about stationary, except for the 
depression of the nineties. In 1898 the rate was 71 cents; in 1899, 
75 cents; 1902, 83 cents; in 1906, $1.03; and in 1909, the same 
amount, $1.03. 

There is still the same arrangement of geographic divisions as 
before, in 1909, in order of amount of rate of wages paid for labor 
other than harvest work, with board. 

TABLE 17 

Average Wage Rates of Outdoor Labor of Men on Farms, per Day for Day Labor in Har- 
vest Work, with and without Board, by Geographic Divisions, g Investigations 
from 1891 to igog 

without board 



State and Geographic Division 


i8gi 

or 

1892 


1893 


1894 


1895 


1898 


i8gg 


1902 


1906 


igog 


Geographic division: 
North Atlantic 


1.72 
1.08 
1.67 
1. 12 
2.04 


1.68 

1. 00 
1. 55 

1. 01 
1.86 


1-57 

• gs 
1.38 

.91 
1.67 


1.56 

• g4 
1. 41 

• 95 
1.60 


1.60 

• g7 

1-53 
1.07 

1.80 


1.66 
.99 
1.66 
1.09 
1. 91 


1.82 
1.08 
1.89 
1. 21 
2.12 


2.07 
I-3X 
2.17 
1-45 
2.30 


i.g8 






North Central 


2.21 




1.34 


Western 


3.51 


United States 


1-39 


1.30 


1. 18 


1. 19 


1 .2g 


i-35 


i-5i 


1.76 j 1 .71 






WITH BOARD 


Geographic division: 


1.33 

• 85 
1.32 

.86 
1.56 


1.36 
.83 

1.28 
.84 

1.48 


1.26 

.78 
1. 13 

.76 
1.30 


1.25 
.76 

115 
.76 

1.24 


1.2S 
.80 

1.24 
.86 

1.44 


1.33 

.S2 
1-37 

.89 
1.56 


1-45 
.89 

1-57 
•97 

1 . 75 


1.69 
1.0S 
1. So 
1. 18 
1.97 


1.62 




1 .0; 


North Central 


1.S7 




1. 10 




2.02 








United States 


1.09 


1.07 


• g7 


.96 


1 .04 


1. 10 


1.23 


1-45 









8 3 2 



AGRICULTURAL ECONOMICS 



The general trend of farm wages during this period of forty-four 
years is shown graphically in the following diagram: 



1 


P 

& 
5 


1 




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A30 
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Fig. i. — Diagram showing average wage rates of outdoor labor of men on 
farms, with board, in the United States. 



Note. — The Agricultural Outlook of March 20, 1915, has the 
following to say concerning the later wage situation. — Editor. 

The money wages of farm labor averaged during the past year 
about 1.7 per cent lower than during the preceding year, but about 
9 per cent higher than five years ago. 

The wages per month without board averaged, for the United 
States, $29.88 during the past year, which compares with $30.31 in 



AGRICULTURAL WAGES 833 

the preceding year, $27.43 five years ago, and $19.97 fifteen years ago. 
State averages last year ranged from $16.50 in South Carolina to $56 
in Nevada. 

Wages per month, including board, averaged $21.05, compared 
with $21.38 in the preceding year, $20.01 five years ago, and $13.90 
fifteen years ago. State averages last year ranged from $12 in South 
Carolina to $39 in Nevada. 

Day labor other than harvest, without board, averaged $1.45 a 
day, compared with $1.50 the preceding year and $1.29 five years 
ago. State averages ranged from $0.82 in South Carolina to $2.54 
in Montana. 

Day labor other than harvest, with board, averaged $1.13, com- 
pared with $1.16 a year ago and $1.03 five years ago. State averages 
ranged from $0.64 in South Carolina to $1.80 in Montana. 

Day labor at harvest time, without board, averaged $1.91, com- 
pared with $1.94 a year ago and $1.71 five years ago. State averages 
ranged from $1.06 in Mississippi to $3 25 in North Dakota. 

Day labor at harvest time, with board, averaged $1.55, compared 
with $1.57 a year ago and $1.43 five years ago. State averages 
ranged from $0.82 in Mississippi to $2.68 in North Dakota. 

The reductions in wages as compared with the preceding year were 
greatest in the Southern States, due largely to the depression in the 
cotton market; but all sections showed some reduction, although a 
few states showed slight advances in some kinds of employment. 

267. THE FARMER'S INCOME 1 
By E. A. GOLDENWEISER 

According to figures secured for the Thirteenth Census, for the 
year 1909, the average value of crops per farm was $511 and of live- 
stock products $177 per farm. In addition £0 these sources of income, 
animals sold and animals slaughtered on the farm show an average 
value of $288 per farm, and the value of house rent and of food and fuel 
consumed by the family but not reported in the census is estimated 
at $260. 

The total earnings of farms and farm families arrived at in this 
way were thus about $1,236 per farm. The farm expenses, for labor, 
fertilizer, feed, seed, threshing, animals purchased, taxes, and miscel- 
laneous items averaged $432 and a maintenance charge of 5 per cent 

1 Adapted from the American Economic Review, XI (March, 19 16), 4J-4S. 



834 AGRICULTURAL ECONOMICS 

on the value of buildings, and of 15 per cent on the value of imple- 
ments and machinery brings the total expenditures per farm to an 
average of $592. Deducting this from total farm income leaves $724 
available for family expenses, for payments on indebtedness, and for 
savings. This amount includes the interest on investments, which 
at 5 per cent is $322, leaving $402 as the earnings of the average 
farm family. 

One way of analyzing the farmer's income is to distinguish between 
the interest on his investment, the wages earned by his own labor 
and superintendence, the value of the unpaid labor of his family, and 
the profits of his enterprise. No information is available for appor- 
tioning the income between these elements, except that about $322 
represents interest, and $402 includes all the other items. 

In addition to the direct earnings of farmers derived from the 
value of farm products, the item of increase in the value of their 
property must be considered. The only way of estimating this in- 
crease is by subtracting from the total value of farm property in 1910 
that for 1900 and dividing the difference by ten. This calculation 
gives an average annual increase in the value of farm property of 
$2,055,000,000, or $323 per farm, of which about $242 was the increase 
in the value of land, $44 in the value of buildings, $8 in the value of 
implements and machinery, and $29 in the value of live-stock. A 
part of this increase in value is the direct result of the farmer's labor 
in improving his farm, while another part is the farmer's share in 
the increase of the nation's wealth. Owing to the fact that the census 
of 1900 was taken in June and that of 19 10 in April, the increase in 
the value of live-stock is an understatement. The increase in the value 
of farm property, in so far as it is real, represents a capitalization of 
the increase in the value of farm products, and the farmer receives 
interest on the increase in the shape of greater returns on his crops. 
It is probably true, however, that a certain amount of the increase 
in the value of the land represents an overvaluation by its owners, 
which may never be realized by them. Even if it is a genuine value 
for 1 9 10, the farmer may not reap the benefit of that value unless 
he sells his farm, for the price of land may decline. Thus the farmer's 
prosperity, like that of any other independent business man, is 
dependent on a large number of factors over many of which he has 
no control. The amount of products for a given year depends in 
part upon the farmer's industry and foresight and in part on weather 
conditions; the price received for products sold is very largely deter- 



AGRICULTURAL WAGES 835 

mined by conditions in the world market and is in large measure 
beyond the influence of the farmer. The increase in the value of 
his land and other property reflects the income that he received from 
his products during previous years, and is influenced by the growth 
of population, the extension of transportation facilities, and many 
other factors. 

The limitations of these figures on farmers' earnings should be 
clearly understood. In the first place they are average figures for 
the United States as a whole, covering decidedly varied conditions 
in different parts of the country. Figures for individual localities 
would be more illuminating, but detailed information for regions is 
not available. It is probably true also that in the figures for the 
United States as a whole the errors are more likely to balance each 
other than they would be in figures for smaller areas. Considerably 
more significant than averages would be figures giving the number 
of farmers in each income group, but such figures do not exist. It 
should also be mentioned that no attempt is here made to draw a 
distinction between the income of farmers cultivating their own land 
and the income of tenant farmers who have to depend almost entirely 
on what the family earns by its labor. Another limitation of the 
figures is that they apply only to the single year 1909; however, this 
was a fairly representative year. Still further, the census definition 
of a farm includes small farms in the neighborhood of large cities, 
whose owners derive their principal revenue from other pursuits 
than agriculture. However, no farms under 3 acres are included 
in the census enumeration unless they produced $250 worth of crops 
or gave full-time employment to at least one man. 

Finally, in stating that the average farm family earned $402 in 
1909, it should be kept in mind that the cost of living on the farm is 
very low as compared with that in the cities. The farm family pro- 
duced and consumed food valued on the farm at $261; in the city 
this same food would cost at least $100 additional, the item for rent, 
considering accommodations, would be higher than $125 in the city, 
and fuel would cost more than $35. The $400 earned by the farm 
family would thus probably correspond to an income of $600 or more 
received by an industrial worker in the city, and two-thirds of the 
farmers have, in addition, the interest earned by their investment. 
Furthermore, while the farming group is not entirely or even nearly 
homogeneous, it is nevertheless true that the extremes of wealth 
and poverty are not represented in it, and that the average is not 



836 AGRICULTURAL ECONOMICS 

composed of as widely divergent elements as would be a similar 
average for an industrial group. 

It might be said that the earnings of farm families as here given 
do not materially exceed the earnings of one adult farm laborer at 
the rate of $30 a month and board. The figures do not, indeed, 
speak of large wealth and do not seem to offer brilliant opportunities 
for young men seeking a short road to affluence; nevertheless, it is 
probably true that the farming population of the United States, 
consisting as it does of more than 30 million people, has a larger 
average income per family than any other equally homogeneous 
group of individuals of anything like the same size anywhere in the 
world. 

Note. — The same writer has carried this study somewhat farther 
in Farmers 1 Bulletin 746, in which he makes comparisons between 
the incomes of farmers and other classes of workers. After deriving 
the figure $402 as above, he points out that this average 

is affected by the financial losses sustained by the estates of wealthy persons who 
farm for amusement, by the small farm incomes from suburban farms whose 
owners earn their living by occupations other than farming, and by the low wages 
of small tenant farmers in the South, where tenantry in many cases is simply a 
method of hiring labor. Furthermore, the $402 include no earnings derived from 
pursuits other than farming, an item that is important in certain regions in which 
even genuine farmers often engage in lumbering or other outside work in addition 
to their work on the farms. There is no doubt, therefore, but that this figure is 
lower than the true average income of typical farmers throughout the country. 

The office of Farm Management has made intensive studies of 4,018 farms in 
widely scattered sections of the United States. In each region selected all the farms 
were investigated, but the regions themselves generally represent better than 
average conditions. The average earnings of these farms were $952, of which 
about $400 represented the value of the house rent and of food and fuel supplied 
by the farm, and about $550 the cash income of the farm family. The two figures 
may be considered as the extremes between which the true average lies. It is 
significant that the averages obtained by actual investigations of 25,000 families of 
wage earners made by the Bureau of Labor in 1902 shows an average income of 
$750 per family, and a study of 16,000 industrial families made by the Immigration 
Commission in 1909 shows an average of $721 per family. While the farm families 
of the United States thus seem to be making about the same amount as the 
industrial families, 

their financial position is rendered more advantageous by reason 
(1) of the lower cost of living in the country, (2) the interest yielded 
by the farm investment, and (3) possible gains from the increase in 
value of farm property. 



AGRICULTURAL WAGES 



837 



Allowing for the unpaid labor of members of the farmer's family, 
and assuming that the representative farmer would secure a labor 
return half-way between the two extremes mentioned above, the 
average wages of the American farmer would be about $200 in cash 



EARNINGS OF DIFFERENT CLASSES OF WORKERS 


ANNUAL AVERAGE FOR: 
FARMERS 

CASH MM FARM SUPPLIES SS-B 

WAGE EARNERS 

ON STRICT RAILWAYS 
IN IRON AHO STEEL WORKS 
IN FACTORIES 

IN TELEPHONE COMPANIES 
SALARIED EMPLOYEES 

IN FACTORIES 

ON STREET RAILWAYS 

PATROLMEN 

FEDERAL EMPLOYEES 

IN TELEPHONE COMPANIES 

CLERGYMEN 




EAR 


NINGS 


IN DOLLAR! 


i 

B * 


c m> ne» 


COO 

tu 

CIO 

tea 

OB 

"?? 

101? 
9*G 


































































































































«r 













































































and $400 in things supplied by the farm — $600, as compared with 
$460, for the average factory worker and $1,200 for the average 
salaried employe. These comparisons are shown graphically in the 
accompanying diagram. — Editor. 



XVI 
SOME PROBLEMS OF AGRICULTURAL LABOR 

Introduction 

We are prone to think of " labor problems" as confined to urban 
employments, and to assume that rural labor is performed under safe, 
healthful, and otherwise satisfactory conditions. This was perhaps 
measurably the case in the agricultural experience of the generation 
that is passing. Farming was almost exclusively a family enterprise 
and labor was employed under home conditions. The pioneer wife, 
to be sure, might be grossly overworked, both in the farm kitchen and 
in the harvest field, and growing boys were doubtless often set at 
tasks beyond their strength. Poor housing and diet were abuses that 
existed then as now (see selections 29 and 30), and hard drinking is 
no new evil in country districts (selection 272). 

But, on the other hand, the coming of machine processes and 
capitalistic methods has raised some problems of agricultural laborers 
which were little, if at all, known in the older day. Machine appli- 
ances make certain of the better sorts of labor vastly more efficient 
than they could be under hand methods, but it also creates new pos- 
sibilities of injury and possible death. The use of machinery enables 
the farm manager to dispense with hand workers in many processes, 
but it likewise brings about a demand for certain classes of skilled 
labor of which there seems never to be an adequate supply. The 
sheer "ignorance and brute strength" which constituted an adequate 
equipment for subduing the wilderness fails to get results from com- 
plicated farm machinery or highly bred dairy cows. 

The passing to more specialized and intensive types of culture 
creates strong seasonal demands for labor of inferior grades in the 
routine processes which cannot be taken over by machines. With 
this come irregularity of employment, itinerant labor, exploitation 
of workers by employment agencies and labor bosses, and most if not 
all of the abuses with which we have become familiar in connection 
with the use of low-grade labor in industrial employments. 

Finally, the emergence of a separate class of laborers in agriculture 
has already given rise to class consciousness and organization for the 
attainment of class ends. Selection 264 turns our eyes to France to 

838 



SOME PROBLEMS OF AGRICULTURAL LABOR 839 

show us that what is new and sporadic in America has become the 
established order in older agricultural communities. England has 
seriously considered the issue of minimum wage legislation for farm 
laborers. Since it is evident that the future trend of our development 
will be toward more industrialized conditions in agriculture rather 
than less, it behooves us to recognize these problems early, investi- 
gate them carefully, and attempt to take preventive measures now 
rather than wait for a day of drastic remedies. 

A. Hours and Conditions of Labor 

268. THE LONG DAY 1 
By CARL W. THOMPSON and G. P. WARBER 

Even the best farm manager of today finds that there are certain 
seasons of the year when work has to be rushed. Even today at harvest 
time the best of farmers are obliged to put in longer hours per day. A 
field of early oats ripens at the same time that barley is dead ripe, and 
the farmer dares not put off until tomorrow what can be done today. 

Some years a late spring or a prolonged rainy season will put the 
best farm manager away behind with his work. So it was in the 
southeastern part of the state in the spring of 191 2. Many farmers 
could not begin to seed until a month later than the usual time. In 
order to get any crop at all in such cases it is necessary to keep horses 
and labor going as long as they can stand it. In this way a man with 
ample help for ordinary seasons may be obliged to rush work all 
summer long, for the growing season is limited. Thus, when a field 
of new-mown hay is nicely cured, an impending storm necessitates 
keeping on hauling until darkness stops the field work for the day. 
It is not uncommon for town people, returning from an evening's 
automobile spin in the country, to see lights in barns at ten o'clock 
at night. If they were to stop to listen, they might hear the hum 
of the cream separator, the goodnight refrain for the sweat-drenched, 
fatigued lad, who is turning the machine as the last job of the day. 

True it is that such late hours are no longer the rule. The average 
working day is about ten hours in the field. But, as already alluded 
to, there are several hours required for chores. The thrifty, well-to- 
do farmer rises at four-thirty or four-forty-five in the morning during 
the season of field work. The chores are done by six or six-thirty, 
depending upon the number of cows, and the number of hands to 

1 Adapted from " Social and Economic Survey of a Rural Township in Southern 
Minnesota," University of Minnesota Studies in Economics, No. 1, 9-10. 



840 AGRICULTURAL ECONOMICS 

milk them. Breakfast is a matter of only fifteen minutes or so, and 
by seven o'clock every good farmer has to be starting his field work. 
Most farmers want their dinner regularly at twelve o'clock. The 
housewife must have the meal ready at that time, though occasionally 
she will be kept waiting until one o'clock or after before the men feel 
that they can drop the job on hand and take time to eat. One hour's 
time is ordinarily allowed for dinner. This noon hour may include 
ten or fifteen minutes for scanning the daily paper, but there is no 
time for recreation. First, the horses must be fed and then the men 
wash up and sit down for their own meal. At one o'clock, or as soon 
after as possible, "it's get out the horses and back into the field again." 
The afternoon's work drags on until six o'clock, which is the approved 
quitting time. As we have seen, however, the chores remain to be 
done after supper is over. By eight, or eight-thirty ordinarily, most 
farmers are through with the day's work. 

We have not yet considered the routine of tasks for the winter 
months. Naturally the hours of work are shorter. The keeping of 
high-grade dairy cattle requires regular hours, however, and the best 
dairymen milk their cows at the same hour in the morning and eve- 
ning the year around. This necessitates a five o'clock rising hour for 
the winter also. Even though the work is not so toilsome during the 
winter months as it is in the hot, sultry weather of June or July when 
the hay has to be mowed away, or the barley threshed, the milk has 
to be taken to town every morning no matter how cold it is, and the 
whole day long a man is kept "puttering around" the yard doing 
chores. The work is finished earlier in the evening than it is in the 
summer, but the care of high-priced live stock prevents participation 
in social gatherings as of yore. "Under big-scale ranch-farming con- 
ditions, it used to be all right to trust to luck in April and see how 
many lambs you could count gamboling on the meadows green in 
May; but a man on a present-day farm, raising pure-bred horses, 
cattle, and hogs, has to pass many sleepless nights in tending the 
dams, or his year's business will represent a loss." 

269. A TEN-HOUR DAY 1 
By GEORGE T. POWELL 

Thirty years ago, late of an evening, while sitting upon the porch 
of my home, I heard the sound of welts and blows that were being 
delivered with a stick upon the backs of the cows of a near neighbor. 

1 Adapted from The World's Work, XXVII, No. 2 (December, 1913), 232-35. 



SOME PROBLEMS OF AGRICULTURAL LABOR 841 

The hired man, after a day of toil, by the dim light of a lantern was 
milking several cows, and in ill temper over it, when he should have 
been at his home having needed rest and relaxation. With every 
blow that was knocking all possible profits out of my neighbor's cows, 
I was convincingly impressed that the system of farm labor was upon 
a wrong and uneconomic basis. Though other industries had adjusted 
their labor to shorter hours with a gradual increase in wages, farming 
was being conducted on the old line of long hours, and so was steadily 
driving the best class of labor from that industry. 

Soon after this stable incident, the men working at my Orchard 
Farm were informed that a change in working hours had been decided 
upon, and that, thereafter, they would be required to work only ten 
hours a day, but that I should expect that all necessary work would 
be accomplished in the shorter time. The announcement was a sur- 
prise to the men and it gave them a new understanding of farm work. 
They at once put new activity, energy, and interest into their work. 
A standard of greater efficiency was established. 

At the time of engaging men for the next year, applicants for work 
under the new system were numerous, and among them was the man 
who beat the cows. He was accepted and proved to be an intelligent 
and faithful worker; and he remained on the farm for twenty-four 
years. 

With the shorter hours of labor, with good schools and churches 
within a short distance of the farm, with time and opportunity for 
cultivating a few flowers about the home and reading the agricultural 
papers and books that were supplied by the farm and by a well- 
equipped school library, these families had no desire to give up farm 
labor and to leave their farm homes for homes in the city where no 
such privileges or comforts were possible. 

270. ATTRACTING AND HOLDING THE RIGHT KIND OF FARM 

HELP 1 

There is no hired help problem at Ravenswood, the 2,200-acre 
farm of C. E. Leonard and Son, in central Missouri. Good tenant 
houses, a community center, and all-the-year-round employment have 
made possible the solution of this problem. This estate has been in 
the Leonard family for almost a century, and the question of a suffi- 
cient farm force made up of efficient and trustworthy workers has been 

Adapted from "Solving the Problem of Farm Labor," The World's Work, 
XXVII (December, 1913), 230-35. 



842 AGRICULTURAL ECONOMICS 

studied for a good many years. The satisfactory labor conditions 
that are today noticeable to every visitor at Ravenswood are the 
results of an evolution. 

One rule is that every man is to be paid what he earns and must 
earn what he is paid. But in addition to this the owners have shown 
a broad sympathy for the employes. The satisfaction of the men 
has been sought. They, in turn, feel a pride in the place. Com- 
fortable homes, beautiful surroundings, a real rural graded school, 
a neighborhood church, good roads, telephones, rural free delivery 
mail service, and an out-in-the-country community center — all these 
are for the men and their families to enjoy. The tenant houses at 
Ravenswood differ widely from the type found on too many farms. 
They are attractive in appearance, conveniently arranged, of pleasing 
architecture, and no two houses quite alike. The "our home" idea 
is carefully cultivated. Some of the tenant houses are of brick and 
have slate roof s ; others are of frame with asbestos shingle roofs. All 
houses have cement porches. The cost of these buildings varies from 
$1,050 to $2,200. 

On a five-acre tract of land on the corner of the farm adjoining 
the little hamlet of not more than a dozen homes is the rural school, 
a two-story brick building with large basement and adequate heating 
plant. The cost of this modern schoolhouse, built last year to replace 
an old-time structure of the box-car kind, was $3,800. Of this 
amount the Messrs. Leonard gave $1,000. They also donated the 
land, with the understanding that work in agriculture is to be carried 
on and that crop and soil experiments are to be conducted from year 
to year. Liberal as they have apparently been, they frankly say that 
what they have done has not been done unselfishly. The right kind 
of people, they reason, will wish their children to have school advan- 
tages, so the only way to keep these people on the place is to see that 
the school is provided. 

Just across the road from the schoolhouse is the church where on 
Sundays the tenants on the Leonard farm may go and feel welcome 
as they meet with other farmers and their families. Because the need 
of church advantages is recognized, just as is the necessity of educa- 
tional opportunities, Ravenswood gave largely to the funds to build 
this church a number of years ago, and has since liberally supported it. 

The proprietors of this big country place believe in neighborhood 
betterment and have tried to make the environment conducive to a 
clean and healthful childhood. Furthermore, they hold it to be true 



SOME PROBLEMS OF AGRICULTURAL LABOR 843 

that the man who has worries at home is likely to be less efficient in 
his work — and the standard of efficiency is kept up on this farm. 
Every man is treated with consideration; no abusive language toward 
the men is allowed. Merit is recognized. Hands who work in the 
fields are not required to do the chores after a hard day's work. Men 
whose services prove satisfactory are assured of employment through- 
out the year. And every employe is paid promptly. Christmas is 
observed in old-fashioned style every year. Every man, woman, and 
child is invited to "the big house" and everybody gets a present off 
the Christmas tree. Kindness is a consideration in keeping help on 
this farm. 

Somewhat similar is the experience of a prominent grape grower 
of Fresno County, California. He learned that one of the fixed 
habits of the Japanese was to take a hot bath as often as they could 
get one. He concluded that a little deference to the habits of the 
men would be worth what it cost. He installed a big sheet-iron tank 
and water-heating device. Every day, at noon and at evening, the 
delighted Japanese splashed about in the hot bath that they loved, 
and grape pickers were easily secured when the neighbors could not 
get them at any price. 

Then the idea was carried on to the treatment of the permanent 
white laborers. The "bunk-house" of the majority of western 
ranches is a rude, unpainted "shack," thrown together on the theory 
that any covering from the wet is enough for the "blanket stiffs" who 
bring their own bedding on their backs and who have known too often 
the necessity of sleeping in the open or under a friendly haystack to 
disdain something even a little better. But Mr. Tarpey felt that 
more than this was needed to give the men the comfort that would 
persuade them to give their best efforts and their personal interest to 
his work. So he built a neat, two-story frame house with a separate 
room for every man. Instead of the straw-lined bunks there were 
plain iron beds and mattresses. There was a bathroom with the 
simplest kind of shower attachment but with hot and cold water. 
And one large room downstairs was fitted with writing and card 
tables, some books and magazines, plenty of light to read by, and a 
good stove. Here the men could spend the evening in cheerful social 
pleasures instead of in the dismal, lantern-lit, and cold discomfort of 
a bunk-house. 

That investment, also, has paid well. It has enabled the employer 
to attract and hold the sober and self-respecting and industrious men 



844 AGRICULTURAL ECONOMICS 

of the white laboring population. Men of that sort pay for the extra 
cost of their care by exceptional initiative and by unusual devotion 
to their employer's interests. 

271. SOLVING LABOR TROUBLE IN CALIFORNIA 1 

There occurred on August 3, 19 13, on the Durst hop ranch near 
Wheatland, Yuba County, a riot among the hop pickers employed on 
the ranch, resulting in the killing of two police officials and two 
pickers. It was the claim of the pickers that one of the primary 
causes of the discontent in their ranks, leading to riot and bloodshed, 
was the insanitary condition of the camp in which they were segregated 
on the ranch Brief investigations and reports of state officials had 
partially substantiated these claims. Before the trial of Richard Ford 
and Herman Suhr, charged with having caused the murder of one of 
the state officials by inciting the crowd of pickers to riot, was begun, 
it was announced that evidence concerning the sanitary and living 
conditions in the camp would be introduced. Consequently the 
Commission of Immigration and Housing decided to avail itself of 
this opportunity to conduct a careful investigation into the economic 
and social causes leading up to the riot. The results of this investi- 
gation are here merely summarized. 

In previous years there had often been a lack of pickers when the 
hops were ripe, but in the season of 19 13, by means of coastwide 
advertising, the Durst brothers succeeded in assembling an army of 
nearly 3,000 persons, and at the time of the riot there were probably 
2,800 workers in the camps, about half of them women and children. 
Of this number, fully 1,000 were foreign born males, including Syrians, 
Mexicans, Italians, Porto Ricans, Poles, Hindus, and Japanese. The 
American element was made up of wandering casual workers, poor 
persons from near-by towns, owners of small ranches in the foothills 
of the Sierras, roving hoboes, and a few families of the better laboring 
class from towns and cities, who often go to the hop fields for their 
summer " outing." 

When this motley horde arrived at the Durst ranch, they found a 
desolate, sunbaked field, without shelter from the burning California 
sun. There were a few tents to be rented at 75 cents a week, but the 
majority had to construct rude shelters of poles and gunny sacks, 

1 Adapted from First Annual Report of the Commission of Immigration and 
Housing of California (January 2, 1915) pp. 15-50. 



SOME PROBLEMS OF AGRICULTURAL LABOR 845 

called "bull pens," while many were compelled to sleep in the open 
on piles of vines or straw. 

There was a great lack of toilets, and even those furnished were 
but crude makeshifts. These unspeakable toilets were used indis- 
criminately by both sexes. There was a scarcity of drinking water, 
some of the wells were pumped dry, while others became infected from 
the surface water that drained back from stagnant pools, which formed 
in close proximity to the toilets and garbage piles. Under such shock- 
ingly insanitary conditions sickness followed as a matter of course. 
There were cases of typhoid and malaria, caused probably by these 
germ laden waters. 

While the wage scale and other factors contributed to the feeling 
of discontent, the real cause of the protest of the pickers seemed to 
come from the inadequate housing and the insanitary conditions 
under which the hop pickers were compelled to live. 

The Commission of Immigration and Housing decided that these 
conditions constituted an aggravation of industrial warfare, and that 
they could and should be changed. It was ascertained that the Durst 
camp was no exception; similar conditions existed in other labor 
camps throughout California and it was evident that a state-wide 
"clean-up" campaign was necessary. This task really came under 
the jurisdiction of the State Board of Health, but that body was 
without funds to do the work of inspection and of correction. 
Consequently, the Commission of Immigration and Housing, with 
the consent of the State Board of Health, decided to enter upon 
the undertaking itself, particularly because over one-half of the 
population of the labor camps of the state is made up of immi- 
grants. 

The existing state law pertaining to the housing and sanitation of 
labor camps was found to be indefinite and inadequate. It merely 
states in general terms that tents, sleeping quarters, and the ground 
about the camp must be kept clean. No way is provided for ascer- 
taining the conditions of the camps, except through the occasional 
complaint of a laborer fearless enough to risk incurring the displeasure 
of his employer. Nor does the statute attempt to set forth a minimum 
standard of housing and sanitation. Owing to these weaknesses in 
the existing law, the Commission had first to work out a minimum 
standard of living conditions in labor camps. This minimum standard 
must be sufficiently high to insure results, but not so expensive and 
so impracticable as to deter employers of labor from adopting it, since 



846 AGRICULTURAL ECONOMICS 

employers had to be persuaded, rather than compelled by law, to 
make the improvements suggested. 

It was not until after eight months of experience in camp sanita- 
tion work that the Commission drafted a detailed law to govern labor 
camp sanitation. This law does not deal in generalities but makes 
specific regulations for every feature of the camp. 

In order that it might be sure of its ground in the beginning, the 
Commission decided to take over a camp and make it sanitary, thus 
putting theories to actual test. This first experiment in camp sani- 
tation was made at Shingle Springs, Eldorado County, where 129 men 
were employed by the state on the state highway. The sanitary 
engineer of the Commission was sent to the camp, where he installed 
sanitary camp latrines, shower baths, fly-screened cooking and dining 
tents, model sleeping quarters, garbage incinerators and other modern 
improvements at a minimum cost. The results were very satisfactory 
and a set of sanitation rules was drawn up accordingly. These rules 
and the practical suggestions for carrying them out were incorporated 
in a small pamphlet of seven pages, which met with the approval of 
the State Board of Health. 

These pamphlets were distributed among camp operators, and 
two inspectors, under the direction of a sanitary engineer, were put 
in the field. Although most of the camps were below the minimum 
standard, the inspectors found that employers or operators were will- 
ing to co-operate in the effort to improve the conditions of the men, 
but they did not know how to go about the work. Consequently, a 
larger and more comprehensive pamphlet, containing detailed plans 
and instructions,was prepared for general distribution. 

Believing that much of the abuse arose more through carelessness 
and ignorance on the part of those operating labor camps than because 
of any disposition to avoid the law, the whole spirit of the pamphlet 
was " co-operation and advice," rather than " compulsion." 

During the months of June, July, August, and September, when 
the largest number of labor camps are in existence, from five to seven 
inspectors were kept in the field. The inspectors found little, if any, 
antagonism, some procrastination, and a great deal of good feeling 
and hearty co-operation. They reported their findings to the office 
of the Commission on blanks prepared for the purpose, which gave 
every detail of the camp inspected, including the number and nation- 
ality of men employed, permanent or transient, skilled or unskilled 
labor, living conditions, sanitary conditions, toilets, bathing facilities, 



SOME PROBLEMS OF AGRICULTURAL LABOR 847 

etc. A letter of instructions and a pamphlet were then promptly 
mailed from the main office to each owner or superintendent, calling 
attention to the special needs of his camp, and inviting correspondence 
with the office of the Commission if any difficulty arose in trying to 
make his camp conform to the requirements. 

The active inspection began on April 10, 19 14, and ended Novem- 
ber 1, 1 9 14. Practically no reinspections were made during this 
period, it being the policy to visit as many camps as possible during 
the summer months. Camps were classed as "good," "fair," and 
"bad," according to a rating established in connection with the mini- 
mum standard; 297 of the 876 camps were "good" and housed 21,577 
persons; 316, housing 22,382, were "fair"; 263, housing 16,854, 
were "bad." 

A striking feature of these statistics is the tabulation of nationali- 
ties. Forty different nationalities were represented, and of all the 
workers in the camps, 50 . 7 per cent were immigrant aliens; 49 .3 per 
cent were American born and naturalized immigrants. The statistics 
as gathered do not show the proportion of the 49 .3 per cent that are 
foreign born naturalized citizens. These figures show how close is 
the connection between the work of labor camp sanitation and the 
work of raising, or protecting, the standards of living of immigrants. 
In improving labor camp conditions, the Commission has done much 
to protect its immigrant wards, and has guarded against the lowering 
of the workers' standards of living by those races that are more care- 
less and more ignorant in this regard. 

The table further shows the presence of 2,659 women and 1,553 
children in the camps as against 31,741 men. This comparison is of 
social interest and significance. A census gathered when the camps 
are filled to their ultimate capacity would probably show a larger per- 
centage of women and children, since such a census would cover hop, 
berry, and fruit camps, etc., where women and children are more 
often employed. 

The figures on the proportions of skilled and unskilled laborers are 
of economic and social value in that they throw great light upon the 
character of our casual or migratory laboring class. Of the 30,020 
laborers concerning whom data as to skill were obtainable, 22,560 
were unskilled and only 7,460 were skilled. 

Up to January 1, 1915, 228 camps had been reinspected. The 
results are most gratifying. Where it was found that no effort had 
been made to correct abuses and improve conditions, the attitude of 



848 AGRICULTURAL ECONOMICS 

"advice and co-operation" was changed and the operators have been 
warned that, unless they improve conditions as requested at once, the 
Commission will do all that is possible to prosecute them under the 
existing laws. The Commission will endeavor to have such camps as 
really constitute a menace to public health and safety condemned as 
public nuisances by the health authorities. 

It is most important to note, however, that 72.3 per cent of the 
camps reinspected have been brought to at least the minimum stand- 
ard. Many have surpassed it, and 77.1 per cent have actually carried 
out some of the suggested improvements. The camps which remained 
in the same condition represent only 14 . 1 per cent of the total. Only 
8 . 8 per cent have actually retrograded, and only 5 . 3 per cent of these 
have slipped down to "bad." 

It is also interesting to note that the owners of the Durst ranch 
at Wheatland co-operated with the Commission, and, under the super- 
vision of the sanitary engineer, a model camp, complete in every par- 
ticular, was constructed. In spite of the activities of agitators there 
were no riots or demonstrations and there is no doubt that the model 
camp was a factor in frustrating such attempts. 

272. INTEMPERANCE AS A LABOR PROBLEM 1 

The liquor question has been emphasized to the Commission in 
all parts of the country as complicating the labor question. It seems 
to be regarded as a burning country life problem. Intemperance is 
largely the result of the barrenness of farm life, particularly of the 
lot of the hired man. The commission has made no inquiry into 
intemperance as such, but it is impressed, from the testimony that 
has accumulated, that drunkenness is often a very serious menace to 
country life, and that the saloon is an institution that must be ban- 
ished from at least all country districts and rural towns if our agri- 
cultural interests are to develop to the extent to which they are 
capable. The evil is specially damning in the South, because it 
seriously complicates the race problem. Certain states have recently 
adopted prohibitory regulations, but liquor is shipped into dry terri- 
tory from adjoining regions, and the evil is thereby often increased. 
There is most urgent need for a quickened public sentiment on this 
whole question of intoxication in rural communities in order to relieve 
country life of one of its most threatening handicaps. At the same 

1 Adapted from "The Report of the Country Life Commission," Senate 
Document No. 705, 60th Cong., 2d sess., p. 44. 



SOME PROBLEMS OF AGRICULTURAL LABOR 849 

time it is incumbent on every person to exert his best effort to provide 
the open country with such intellectual and social interests as will 
lessen the appeal and attractiveness of the saloon. 

273. THE ACCIDENT HAZARD IN FARM WORK 1 
By DON D. LESCOHIER 

The substitution of power machinery for hand labor has made 
agriculture a hazardous industry. Corn shredders, grain separators, 
gasoline engines, threshers, cream separators, and other forms of 
machinery have changed the character of agricultural processes until 
much of the labor in the industry has become more analogous, both 
in method and in danger, to factory work than to the earlier agricul- 
ture. Not only this, but much of the machinery used is far more 
dangerous than that used in most factories, for sufficient attention 
has not been paid to guarding it. The public has not known enough 
about the number and the causes of accidents on farms to realize 
that farmers need legal protection against unguarded machinery as 
badly as do factory workers. Prevention is further retarded by the 
fact that the accidents are distributed over so wide an area that the 
persons injured do not combine and crystallize a sentiment for pro- 
tection. When five men in a factory are killed in a year, the opera- 
tives begin to ask why these accidents are happening and how they 
can be prevented; but when as many occur among the same number 
of farmers they do not realize that they have need to co-operate for 
protection. 

Sixteen fatal accidents, two likely to prove fatal, eighty-five 
serious injuries, and thirty- two severe ones — a total of 135 accidents — 
were reported from Minnesota's agriculture during the past twenty 
months [September, 191 1], eighty-two of them, including four fatali- 
ties, in the last four months. Probably we do not get a full report 
of all accidents; certainly the returns for the first twelve months were 
decidedly incomplete. The figures given must be considered as 
illustrations rather than statistics. 

Forty-one per cent of these accidents occurred on corn shredders, 
which are the most dangerous agricultural machines in use in the 
Northwest. The Minnesota legislature passed a law (copied from 
Wisconsin) designed to prevent these accidents. Its purpose is, first, 
to require such an elongation of the hood over the snapping-rolls of 

1 Adapted from The Survey, XXVII (October S, 1911), 946-50. 



850 AGRICULTURAL ECONOMICS 

corn shredders that a man cannot reach in and touch either the snap- 
ping- or husking-rolls, and, second, to prohibit the operation of 
unguarded machines by incompetent persons. Vigorous efforts are 
being made by the labor commissioner to make the law effective, and 
these regulations will unquestionably stop most of the accidents, 
though it will be difficult to prevent the employment of any but com- 
petent men on the old machines. The ability to reach the rolls, and 
the youth and inexperience of many of the operators are the prime 
causes of the casualties. 

Corn shellers cause accidents similar to those on corn shredders, 
but not so many of them. The wood saw is another dangerous 
machine on Minnesota farms, and, in the last five months, six serious 
accidents have been reported from its use. Most of them could have 
been avoided by a guard on the saw. Belts and gear-wheels probably 
rank next to corn shredders as causes of unnecessary accidents. The 
belt accidents are due either to attempts to put on or take off belts 
with the machinery running, or to unguarded belts. We can see no 
reason why light, transportable guard fences cannot be used to guard 
the belts of machines moved from farm to farm, and a permanent 
guard be used to protect belts on stationary engines, as similar belts 
are protected in factories. 

The number of gearing accidents indicates that they, too, are to 
be seriously considered. While oiling machines, the oiler frequently 
gets his hand caught in the gears or a sleeve or glove catches in the 
exposed cogs of a gasoline engine or other machine. Nearly all such 
accidents could be prevented by covers over the cog-wheels. An 
inspection of the agricultural machinery on exhibition at last year's 
state fair revealed that it is the common thing to leave dangerous 
gear-wheels entirely uncovered. The manufacturers allege that the 
farmers want the machines at the lowest possible cost, and they must 
economize wherever possible in manufacturing them. 

Occasional accidents occur on a number of other machines — such 
as hay presses, cream separators, corn binders, hay and litter carriers, 
mowers, and grain separators — but in most cases the accidents are 
due either to a special carelessness on the part of the person injured 
or to one of the causes we have already noted — especially gear-wheels 
or belts. In our list of 135 accidents, four farmers were badly injured 
by dynamite while blasting stumps. They clearly lacked knowledge 
of how to handle the explosive. One farm laborer was killed by a 
vicious bull and another seriously injured; three were badly hurt by 



SOME PROBLEMS OF AGRICULTURAL LABOR 851 

horses. A farmer descending a wheat-stack lost his balance and fell 
on a pitchfork, sustaining injuries from which he died. Two threshers 
were going up hill on a threshing engine. The machine "reared up" 
as a horse rises on its hind legs. They jumped and ran. The machine 
came back to the ground and, uncontrolled, followed one of the men 
to the fence, crushing him to death. Two others were crushed, but 
not seriously, between an engine and a separator, because of the 
breaking of a coupling-pin. A farm laborer fell in front of a gang- 
plow. He was. caught by the plow-share, and his leg was terribly 
lacerated. A farmer trimming one of his trees fell to the ground and 
was killed. Another was thrown from a wagon that tipped over 
while turning. His shoulder and several ribs were fractured. 



B. Finding Men and Finding Jobs 

274. HARVEST HANDS IN KANSAS 1 

The bumper and super-bumper crop in the West is making insis- 
tent and desperate demands for more laborers for the coming harvest. 
A report from Kansas given to the New York Evening Post says that 
the need in that one state includes 42,000 extra men, 6,300 extra 
teams, and 2,300 cooks. In explanation the account continues: 

The average county in the wheat section has a small population. The 
farms are large, the towns small. Take Pawnee County, for instance, out 
in southwest Kansas. It has a population of 8,500 or 1,700 families. 
There are 275,000 acres of wheat to cut and thresh. If every available man 
in the county could be put at the job, the work could not be done during 
the short period during which wheat must be handled. Once ripe the 
heads shell freely, and the grain must be garnered. As harvest approaches, 
the farmer begins to call for help. This has been developed into a system. 
With a State Labor Bureau in correspondence with county officers, city 
officers, city clerks, farmers, and township officers, the needs are tabulated. 
Even the fraternal orders have taken a hand and have sent back to Indiana, 
Ohio, and other states to fraternities to send men west. Hundreds of 
college boys have been enlisted and have come to the harvest fields for the 
experience and to earn vacation money. 

The railroads are co-operating, either willingly in acting as agents 
for the farmers, or willy-nilly as the furnishers of under-car berths and 
side-door Pullmans to those who do not stop for the formality of ticket 
purchase. In the latter case, the railroads, realizing the extremity, 

1 Adapted from the Literary Digest, XLIX (July 4, 1914), 37. 



852 AGRICULTURAL ECONOMICS 

issue orders for lenient treatment of "dead-heads." There is no 
eight-hour limit — unless it be the "eight hours before dinner and eight 
after dinner" that is the current phrase. The 40,000 men in Kansas 
then will draw over $100,000 a day for labor alone, to say nothing of 
the expense of feeding them. 

The class of men coming west for the harvest is far above that of the 
average tramp — workmen from lumber camps, factory men, college boys, 
small farmers from adjoining states. The employment agencies handle the 
larger portion out of Kansas City and they go in groups to the little western 
towns. While the handling of the army of men appears a haphazard affair, 
it is really systematized through long years of wheat raising, and the 
workers are distributed with promptness. The workers begin at the 
southern border of the state and move north with the ripening of the wheat, 
getting a month or more of steady work. 

275. JAPANESE LABOR CONTRACTORS 1 
By H. A. MILLIS 

The importance of Asiatics in the farm labor situation of Cali- 
fornia has been due in considerable measure to their effective organi- 
zation in "gangs" under "bosses." Japanese bosses are the most 
numerous labor agents, as that race predominates in the labor supply. 
In nearly every town constituting a center of a specialized agricultural 
community, one or more Japanese "bosses" can be found. These 
"bosses," "labor contractors," or "employment agents" are the 
leaders of the groups of Japanese laborers whom they associate with 
them. Usually the smaller "contractors" conduct lodging-houses 
and stores, where their men live on a co-operative plan. The "boss" 
secures work for his men from the ranchers, and carries on all dealings 
with the employer as to the wages or contract price for the work, 
collects the wages for the "gang," and pays the men their individual 
earnings, of which he keeps their separate accounts. The contracts 
for the handwork in intensive agriculture are sometimes written, 
occasionally with a bond required to guarantee the work, but more 
often they are oral. Some contracts are to the effect that the "boss" 
is to furnish a sufficient number of men to properly do the work 
required at the time specified by the rancher, who agrees to pay a 
certain wage per day to each man. 

Some large Japanese contractors take contracts for the handwork 
on many ranches and have hundreds of laborers under them. These 

1 Adapted from Reports of the Immigration Commission, XXIV, 17. 



SOME PROBLEMS OF AGRICULTURAL LABOR 853 

"gangs" are sent to the different ranches, each group of men fre- 
quently finding work for the entire season on a single large ranch, 
under the direct supervision of a "boss" or agent of the contractor. 
The rancher secures any number of men desired through these con- 
tractors, and his only concern then is to see that the right number are 
present and do the work properly. By co-operating with Japanese 
employment agencies and boarding-house keepers in the larger cities, 
these "bosses" are ordinarily able to secure any number of men 
desired. In this way the "bosses" and contractors direct the migra- 
tion of Japanese to communities where the season requires a large 
number of workers, and so tend to equalize the labor supply of the 
state. 

276. THE PADRONE SYSTEM 1 
By FRANCES A. KELLOR 

The immigrant reaches the labor camp usually by way of a 
padrone. From the time he arrives until he goes to work in the 
remote camp he is in the hands of his "friends" — countrymen who 
house him and feed him and entertain him, certain that they will get 
their share of the fee for his job and of the profit the "commissary" 
makes off housing and feeding him when he is "on the job." He has 
no chance to see America through contact with Americans, and is as 
subject to industrial routine as a checked piece of baggage is to 
transportation rules. Furthermore, whenever he protests or makes 
inquiries, he is told that this is America and that to protest means 
the loss of his job. 

Now add to this environment and threat the facts that he cannot 
speak English, that he has little money though plenty of strength, 
that he has dependents who look to him for their daily bread, that he 
is probably in debt for his passage over and for his railway ticket to 
the camp, and that he will be deported if he fails to find work and 
applies for public help, and we have a fair illustration of an immi- 
grant choosing his occupation. 

When the laborer arrives at the camp, he is initiated into the 
routine of American industrial life by the padrone or sub-contractor, 
who, on the one hand, convinces his employer that he can keep his 
men only by letting them live the way they do in Italy, and, on the 
other hand, convinces the workmen that they can hold their jobs 
only by living the way they do in America. 

1 Adapted from the Outlook, CVI (April 24, 1914), 912. 



854 AGRICULTURAL ECONOMICS 

As the company's agent, the padrone naturally can dismiss the 
man who objects to his dispensations, or can bully him into accepting 
them. He can also prevent his being employed by other padroni. 
The padrone's profit comes from two sources — from the fee he charges 
each man for his job, and from what he can make off the housing and 
supplies furnished to these men. The laborer has to buy his food 
from the padrone, who in many camps is allowed to deduct a fixed 
amount from the laborer's wages every month, whether the man buys 
that much or not. Sometimes the food is so stale and worthless that 
the man throws hah of it away and buys more somewhere else. He 
has no place but his bunk in which to keep his food. 

Note. — While the above remarks apply primarily to conditions 
in construction work, the agricultural laborer has not been any more 
gently dealt with by the padrone. Similarly, while the preceding 
selection speaks only of the good offices of the Japanese "boss," it 
not infrequently happens that he exploits his helpless countrymen 
without stint or mercy. Many private employment agencies have 
been not less predatory in their dealings with foreigner and American 
alike. Attempts by state agencies to secure a satisfactory dis- 
tribution of farm labor have as yet met with only partial success. — 
Editor. 

C. Woman and Child Labor 

277. SOME INTIMATE GLIMPSES OF WOMEN'S LABOR 1 

Michigan. — If there is one place where the American farmer excels 
it is in getting the utmost out of his wife and family. He will not 
co-operate, but the combined work of self, wife, and family produces 
a living that another man earns for himself and his family. The busi- 
ness and home are so close together, the demands of the business so 
insistent, and the farmer so needing help that he just naturally assumes 
control of all, and the woman is no longer boss of her own time. On 
the farm she is the partner in the expenses of the farm. She is the 
partner when it comes to picking berries, cucumbers, etc., and the 
farmer doesn't pretend to grow stuff for the cannery unless he has a 
wife and children who can do the picking, etc. He cannot afford to 
hire it done. 

Minnesota. — From the experience of thirty years in the store busi- 
ness in northern Minnesota, I do not hesitate to say that over one 

1 Adapted from Report No. 106, Office of the Secretary, United States Depart- 
ment of Agriculture, pp. 10, 16, and Report No. 103, pp. 46-52. 



SOME PROBLEMS OF AGRICULTURAL LABOR 855 

half of the total work done on the farm has been done by the women 
of the house, besides doing all their cooking and mending and raising 
their families. 

Kentucky. — The woman does 50 per cent of all the work on the 
farm except at the plow, such as clearing up the land, hoeing the corn, 
potatoes, cabbage, beans, etc.; the woman does the same as the man 
in gathering the corn, potatoes, etc. The woman does the work at 
50 cents per day and will ask for the work, while the men hands can't 
be employed on the farm for less than $1 a day. 

Mississippi. — To look at the careworn, tired faces and bent forms 
of the "bride of a few years" in our hill sections, where servants are 
scarce, we realize at once our personal and national neglect and are 
astounded at the enormity of it. I wonder if the gentleman has ever 
'seen a woman plowing cotton with oxen, and what he would think if 
he knew that this woman's husband was working at a sawmill several 
miles away and it was her daily task to get up and cook his breakfast 
so he can be at work at six o'clock. And yet this is a common sight 
in the rural districts. The women living on farms, in addition to 
bearing and caring for their children and doing their own housework, 
work in the fields during the months of May, June, and July, which 
is the hoeing season, and in September, October, November, and 
December, which is the cotton picking season. 

Oklahoma. — Our young girls' and women's health is ruined from 
dragging big heavy sacks of cotton up and down the cotton rows. 
A farmer's wife toils like a slave from before dawn until far into the 
night, trying to do her housework and be a field hand too. 

Texas. — The routine of the southern farm woman is about as 
follows: At this time of the year she is up at 5 o'clock preparing 
the breakfast, after building her own fire; milks the cows, cares 
for the milk — churns the cream by hand; puts the house in order, 
gets the dinner, eats with the family at noon; leaves the house in 
disorder, goes to the cotton field and picks cotton all the afternoon, 
often dragging a weight of 60 pounds along the ground. At about 
sundown she goes to the farmhouse, puts the house in order, washes 
the dishes left over from the noon meal, prepares the supper — most 
of the time too tired to eat; gets the children to bed, and falls asleep 
herself — and so it goes on from day to day. Somehow she finds time 
to do the washing and ironing, mending, knitting, and darning between 
times. During the child-bearing period, there is generally a further 
drain on her strength. The result is she is weak and frail as a rule. 



6 AGRICULTURAL ECONOMICS 



There are a few well-to-do fanners in whose homes we find better 
conditions, but the above description applies to negroes, to white 
tenants, and to young farmers who are trying to build their homes. 
Often the health of young girls is everlastingly ruined through work 
in the fields. I have in mind a case : A girl eighteen years old married 
a farm tenant. She did all the things I have described, and was the 
mother of seven children during the eleven years of her married life. 
Four of these children are dead; the three living are frail of body and 
weak of mind. The mother is at this writing crazy as a loon. Do 
you wonder! In neither branch of the family is there any insanity. 
Simply killed by work and worry — that's her story. 

278. CHILD LABOR IX THE BEET FIELDS 1 
By EDWARD X. CLOPPER 

The youngsters of the Colorado sugar-beet fields do not chase 
butterflies or splash 'round in the old swimmin' hole; they are 
"beeters''; and they are in the fields to labor. Colorado produced 
more tons of beet-sugar in 19 15 than any other state — about a quarter 
of a million tons — and local school superintendents estimate that 
5,000 boys and girls from six to fifteen years of age helped to put the 
state in the lead. These children lose so much time from school in 
the spring and especially in the autumn that for years the situation 
has been one of the most serious problems facing educators in the 
beet-raising sections. 

Most of the children are from seven to thirteen years of age; 
superintendents state that from 80 to 90 per cent of the children 
included in their estimates are under the age of fourteen years. Only 
rarely are the children found to outnumber the adult workers in a 
single field. Viewed in the aggregate, about 7 per cent of field 
workers are children under fourteen years of age. It is only because 
the industry is extensive in Colorado that so large a number as 5,000 
boys and girls are involved. Consequently if the labor of children 
under fourteen years of age were eliminated the industry would not 
suffer. 

The children are almost invariably members of the family living 
on the land, although their residence there is usually only during the 

1 Adapted from The Survey. March 4, 1916, pp. 655-59. A somewhat fuller 
treatment of the subject by the same author may be found in The Child Labor 
Bulletin of February, 191 6, pp. 176-206. 



SOME PROBLEMS OF AGRICULTURAL LABOR 857 

" season." Their work in the fields begins in spring with the process 
called " thinning." The beet plants come up in clusters, and are then 
pulled out until only single ones, about eight inches apart, are left in 
the rows. Boys and girls of seven or eight years and upward work 
steadily at this task throughout the day, bending over the plants, 
their nimble fingers enabling them to keep pace with the adults. The 
next step is hoeing. This is not so tiring as thinning because the 
posture of the worker is more erect; and being a heavier kind of labor, 
it cannot be performed by the very young children. 

The first process in the harvesting is called " pulling." The soil 
between the rows is broken up by an implement called a " puller," 
resembling a plow. This simply loosens the soil about the beets and 
does not throw them out, hence some exertion is required of the 
workers who finish the pulling by hand. Walking between two rows 
and grasping the tops, the child pulls a beet with each hand. Then 
he knocks the two beets together to dislodge the clinging soil, throws 
them into a pile near by, and stooping again, pulls another pair. A 
child must often exert his full strength, especially when the ground 
is "caked" or is very moist and sticky. After having been pulled, 
the larger beets were found to weigh, with the tops and attached soil, 
about 12 pounds each, the average weight of the beets alone being 
5 pounds. The scope of this inquiry did not permit a scientific study 
of physical effects, but it would appear that continuous handling of 
these beets throughout the harvest season, combined with the steady 
stooping, involves a great physical strain and is therefore a very 
objectionable form of work for children. The writer saw children 
of seven and eight years performing this heavy labor, and instances 
were found of children working from 6.00 a.m. to 7:00 p.m. in 
the rush season, their average work-day being from 6:00 a.m. 
to 6:00 P.M. 

The next process in harvesting is "topping," which is done at 
intervals after a few rows have been piled. Each worker provides 
himself with a huge knife about sixteen inches long, having a sharp 
prong at the end by means of which the beet is lifted from the pile. 
A child holds the beet against his knee, and with a vigorous stroke 
cuts off the top. The beet is fibrous and a sharp blow is required, 
and as the knee is not protected, children not infrequently hook them- 
selves in the leg. This work also is unsuited to young children, and 
as the work-day is long, common sense protests that the effect upon 
them cannot be other than harmful. 



858 AGRICULTURAL ECONOMICS 

The amount of energy put forth by boys and girls in these har- 
vesting processes is much greater than appears upon casual observa- 
tion; indeed, the owner of one farm declared that the ten-year-old 
daughter of his contractor topped five tons of beets daily. This repre- 
sented the child's net achievement — as a matter of fact, the total 
tonnage was greatly in excess of this amount, because in the course of 
the day a beet passes through the hands of a worker twice, first when 
pulled, then when topped; moreover, the weight of soil and tops and the 
condition of the ground must be considered. The aggregate weight 
handled by the child daily is therefore much more than five tons — 
this ten-year-old girl was really handling from twelve to fifteen tons. 

Exposure to the weather in late autumn is another factor making 
the work in the fields undesirable for young children. They are often 
insufficiently clothed on cold days. Their hands become badly 
chapped and many distressing cases of suffering are cited by school 
teachers. It is by no means unusual to see families pulling and 
topping in mid-November, when ice is in the furrows and keen, cold 
winds are blowing. Sometimes the children work in the early morn- 
ing and late evening by lantern light; and occasionally, when a 
heavy frost is feared, the work is continued even on Sunday, particu- 
larly toward the end of the season. 

Through energy, persistence, and thrift many families earn and • 
save enough money in a very few years to enable them to buy small 
farms, but this worthy ambition ceases to be a virtue when pursued 
at the sacrifice of the children's proper education and normal child- 
hood. A prosperous beet raiser in the South Platte River district 
keeps his six-, eight-, and ten-year-old children out of school to work 
in the fields, although he owns more than two hundred acres of valu- 
able land. Another family, consisting of father, mother, and two 
girls aged nine and ten years, who worked 40 acres of beets in 1915, 
own a good home in one of the large northern towns of the state; this 
home is boarded up for half the year while the family lives in a little 
shack "in the beets." An eleven-year-old girl was found who, with 
her sister aged seven, is kept out of school to work in the beet fields, 
although her family boasted that they made $10,000 from their farm. 
One parent declared to a school principal that his boy was worth 
$1,000 for work during the beet season, but if he went to school he 
was nothing but an expense. 

Financial considerations, and not the welfare of the child, lie at 
the center of vision in the narrow perspective which characterizes the 



SOME PROBLEMS OF AGRICULTURAL LABOR 859 

lives of so many of these families. The houses are really nothing 
but shanties, poorly constructed and equipped, and are designed 
for temporary residence only. This reveals the readiness with 
which the workers sacrifice all comfort and even necessaries to the 
immediate needs of the work. The children of these families are 
not permitted to attend school regularly throughout the school 
year, for their parents insist upon their helping with work in the 
fields. 

The Colorado compulsory education law is not enforced in the 
beet sections. Children of all ages are absent for months at a time 
and no action is taken. This disregard of the law is unfortunate from 
every point of view, and if the present and future welfare of these 
children is to be conserved the people cannot afford to tolerate these 
conditions longer. The school teachers call attention to the grave 
mistake of permitting the children of these immigrants to grow up in 
ignorance, as unassimilated masses; to the waste of money spent on 
ineffective schools; to the loss to all the children, non-beet- workers 
as well as beet-workers, due to the disorganization of the schools; 
and to the impossible task laid upon the teachers themselves, who are 
expected to get good results under such conditions. Otherwise Colo- 
rado is trying to establish high standards for rural schools, but all 
these efforts are of no avail unless the children attend. The failure 
to enforce the compulsory education law in these districts is of such 
long standing that families now look upon attendance as optional. 
Many a teacher says, "What can we do to enforce attendance when 
the members of our own local school board keep their children at 
home to work in the fields?" 

The consensus of opinion is in favor of what is known as the 
county unit system which would make the county into one school 
district with a county board of education; this board could then 
employ a truant officer to enforce the law through its jurisdiction. 
Some such step is necessary to insure the effective enforcement of the 
school attendance laws. The welfare of the children of these districts 
actually depends upon this issue. 

Note. — Colorado is not the only state in which child labor con- 
stitutes a real problem of rural life. There are the children of the 
onion fields, the potato fields, the berry fields, and — perhaps worst of 
all — of the cotton fields. The following accounts of child labor in 
cotton sections are taken from the letters from farm women tb the 
Secretary of Agriculture {Report No. 105, Office of the Secretary, 



860 AGRICULTURAL ECONOMICS 

United States Department of Agriculture). The first paragraph is by 
a Georgia correspondent, the second by one in Tennessee. — Editor. 

I think we need compulsory education for children in the country, 
so all the children could get an education; but until the farmers of 
the South quit planting so much cotton the children will grow up in 
ignorance. They cannot spare them from the fields; so the good 
woman is compelled to see her offspring grow up without schooling. 

How few know that it is common for children five and six years 
of age to have little sacks fastened about their necks and go into the 
cotton fields and pick cotton as long as their little strength lasts. 
Talk about "child labor" in factories! The factory child has Sunday 
clothes, eats candy, chews gum, and knows Santa Claus, while these 
poor little cotton pickers often are bareheaded and barefooted. Our 
mails are burdened in behalf of our little brown brother, red, yellow, 
and black brother, but never a word for the pale-faced blue-eyed 
babies brought up in the cotton fields. 

D. The Coming of the Union 
279. FARM HANDS ON STRIKE 

Fort Smith, May 2, 19 16. — Farm hands employed at Moffett, 
Oklahoma, and vicinity, opposite Fort Smith, Ark., went on a strike 
Monday because their employers refused to increase their wages from 
$1 to $1.25 a day. The number of strikers cannot be learned, but it 
is understood that the movement has affected many. Several farmers 
and planters from the Moffett region who were in Fort Smith Mon- 
day stated that their employes were not in sympathy with the strike, 
but refused to work for fear of being dealt with violently. 

Some planters assert that the Working Class Union, which has a 
large following among the farm laborers in many parts of Oklahoma, 
particularly in Sequoyah County, is behind the strike. 

280. AGRICULTURAL LABORERS' TRADE UNIONS IN FRANCE 1 

On the eve of the outbreak of the European war, M. A. Souchon, 
professor of law in the University of Paris, published an important 
work entitled La Crise de la main d'osuvre agricole en France. He 
gives a complete summary of the condition of the question on the 
eve of the European war, i.e., just at the moment when this question 

1 Adapted from Monthly Bulletin of Economic and Social Intelligence, Inter- 
national Institute of Agriculture (December, 1915), pp. 17-32. 



SOME PROBLEMS OF AGRICULTURAL LABOR 86 1 

must be considered as entering upon a new phase. A few of the 
important facts are as follows : 

Till the end of the nineteenth century the question of trade unions 
had never arisen among French agricultural labourers, and it seemed 
improbable that it would ever arise, because these labourers were 
isolated from one another, leading the same life as their employer, 
working with him, and eating at his table. It was among the wood- 
cutters of the central parts of France that the question first attracted 
attention. The position of these woodcutters seems to be somewhat 
peculiar. According to M. Souchon they are only employed in the 
woods for a part of the year. During the months of November and 
December they are occupied in felling trees, and for a fortnight in 
spring in barking them. This trade not being exercised continu- 
ously, a woodcutter must have other means of support. He is gen- 
erally also an agricultural labourer. 

Toward 1891 there was a considerable depreciation of wages which 
led to strikes, the first of which were not planned by any pre-existing 
organization, but during the cessation of work syndicates were con- 
stituted. In June, 1892, fifty syndicates in the department of Cher 
alone met in a congress, and claimed to represent more than 6,000 
workmen. In the course of two seasons, 1891-92 and 1892-93, the 
workmen succeeded in having their wages nearly doubled. 

The syndicates rapidly disappeared, but in 1902 under the auspices 
of the General Labour Confederation, the Labour Exchange of Bourges 
organized a congress of woodcutters at which the foundation was laid 
of a National Federation of Labourers on the Land. 

The woodcutters' syndicates acted not only through strikes but 
also tried to work by appealing to the force of the law and by the 
extension of co-operation, but M. Souchon believes that these efforts 
were merely secondary. They sought legal intervention to secure 
the extension of laws respecting the labour of women and children to 
agriculture, to claim for labourers in the state forests the application 
of the decrees of the nth of October, 1899, respecting state contrac- 
tors, and to obtain the appointment of agricultural experts. .The 
syndicates have often demanded that the state should manage its 
own forests directly through its own agents, the exclusion of dealers 
facilitating the formation of co-operative societies of woodcutters. 
The woodcutters' syndicates have in fact taken up the question of 
co-operation, and in 1905 at their annual congress, they drew up a 
vast programme of co-operation for consumption and for production 



\ 



862 x\GRICULTURAL ECONOMICS 

on a basis of communism. Souchon considers that hitherto the results 
have been very small. 

Vine culture, after that of textile plants, has always been in 
France the branch of agriculture most remunerative to the cultivator. 

Since the invasion of the phylloxera and the replanting of the 
vineyards, requirements for successful culture have greatly increased, 
one, as an instance, being the use of sulphur and of sulphate. There 
is more work to be done, and that the farm servants may not suffer 
in consequence many day labourers must also be employed. M. 
Souchon points out the distinction between work in vineyards and 
other work. 

The vineyard labourers have a hard time. They work from sun- 
rise till sunset with an interval of three hours for rest. This repre- 
sents twelve hours per day at the beginning, becoming less, however, 
as the days shorten. Sundays are not exempt, and the only days of 
rest are those when all work is prevented by rain. Some years ago 
time-wages were the rule, but during the last seven or eight years 
attempts have been made to introduce task-wages. The wages vary 
in character. Vinedressers strangers to a locality are in the first 
place lodged by the proprietor who employs them. They sleep in a 
loft on a little straw, but such meagre hospitality can scarcely be con- 
sidered remuneration. Sometimes their travelling expenses are paid 
and they are given their evening meal and wine. But their payment 
is generally made in money. Women grape-cutters receive but half 
the sum paid to men, but the- men are expected to carry the grapes. 

For both men and women payments differ with seasons, districts, 
and even vineyards, but on an average, men receive four francs per 
day and women two francs per day, a rate which seems sufficient to 
allow of some saving by the recipients who for the greater part are 
mountaineers accustomed to lead a very frugal life. Yet they often 
spend much during their stay of three weeks or a month in the vine- 
yards, and so have but little to take home. 

Other day labourers often remain connected with the same prop- 
erty for months and even years but not continuously, for they are 
only called on when there is extra work to be done. M. Auge-Laribe, 
quoted by M. Souchon, calculates that such a workman is generally 
employed 230 or 250 days annually. To tf^m the care of the more 
delicate work is entrusted. The men are employed in pruning, graft- 
ing, sulphur and sulphate spraying of the vines; the women at easier 
work, such as the tying-up of the vine shoots or, at the time of spray- 



SOME PROBLEMS OF AGRICULTURAL LABOR 863 

ing, the refilling of the cans. As women are so poorly paid, proprietors 
are often tempted to employ them instead of men. For this reason, 
the men protested energetically against the employment of women 
and often succeeded in preventing it. 

Ordinarily, to get through the tasks allotted them more quickly, 
the vinedressers unite in groups called bricoles led by a chief workman 
called the moussegne. This collective work, like that of the woodmen 
in the forests, has much aided the development of syndicates. 

The working hours of day labourers in the vineyards are short, 
being seldom more than eight. Their wages kept constantly rising 
from 1820 until the appearance of the phylloxera, and then from 1875 
they began to go down, until in five or ten years they reached a pro- 
portion of about 50 per cent, and they would have been lower still 
but for the exodus of many of the workers. With the replanting of 
the vineyards better times came, but no years have ever been com- 
parable to those between 1850 and 1875 for prosperity. In 1900 and 
the years following there was another fall in wages owing to the failure 
in demand. In April, 1903, hard frosts destroyed the vintage of the 
year, and employers dismissed many of their workmen, while they 
abruptly cut down the wages for the others by 30 or 40 per cent. In 
Herault M. Souchon believes that he is near the truth in stating that 
in 19 13 the ordinary daily wages in winter were 2 fr. 50, and in sum- 
mer from 2 fr. 50 to 3 fr. 50. These figures seem very low when we 
remember that there are frequent intervals in vineyard work. Besides, 
the southern labourers generally live in the cities or large villages, thus 
losing the advantages of a completely country life, one of which is the 
profit made on pig or poultry rearing. Their rent too is high, being 
calculated by M. Auge-Laribe at an average of 80 to 120 frs. Lastly, 
the continual cultivation of one kind of crop is prejudicial to the 
interests of the south through the risk of overproduction, and it is 
also one cause of the higher cost of living. Bread, for instance, is a 
much heavier item of expense to the vinedresser in the south than in 
any other part of France. 

On the 15th of August, 1903, a first congress of vinedressers and 
labourers held at Beziers comprised 31 syndicates. In the following 
November the first strike of any importance was declared, and 
resulted much to the satisfaction of the workmen. In January, 1004, 
agitation increased, spreading from Herault to Aube and Pyrenees- 
Orientales, and in April and May of the same year to Bouches-du- 
Rhone. According to the statistics of the Labour Office, more than 



864 AGRICULTURAL ECONOMICS 

150 strikes of vinedressers took place between November, 1903, and 
May, 1904, affecting about 50,000 strikers. From a strictly economic 
point of view the workmen obtained considerable advantages, of 
which the chief was an increase in wages. But it is difficult to know 
the exact importance of the results of the congress, because the move- 
ment has entirely failed as to unanimity in its requirements. 

The question of wages was not the only one under consideration; 
that of the evils resulting from the long intervals in the work of the 
vineyards calling for special attention, and syndicates proposed various 
plans as a remedy. They also proposed restrictions upon the employ- 
ment of outsiders, of women and of children, and prohibition of extra 
hours and of work by the job — all with a view to retaining the work 
for themselves. But on these points success did not follow as in the 
case of day labour, and the little obtained was very incomplete. At 
first many agreed to the prohibition of women's work, except for the 
replenishing of the sulphur cans, and some of the proprietors agreed 
to employ workmen of the commune. It was invariably specified 
that extra hours should be paid at the same rate as the daily work, 
a notable improvement, as proprietors had hitherto expected extra 
work on pressing occasions to be done either gratis or for a very small 
remuneration. 

Unhappily these good results were very precarious. At first 
proprietors had been taken by surprise and they soon sought means 
of retaliation. The judicial forms stating the agreements were 
generally very inexact, and a strike was seldom ended by a true col- 
lective contract. Generally the workmen were satisfied with a written 
minute, trusting for modifications to local usages, with nothing to 
show that the parties were bound by any legal obligation. This 
proved to be the germ of new conflicts which were not slow to break 
out. 

A second congress of southern workmen was held at Narbonne 
on the 13th, 15th, and 16th of August, 1904. At this congress 107 
syndicates were represented. The members seemed very much 
struck by the diversity of claims and the results obtained since the 
last strikes. Without taking into account that the customs and 
economic conditions are not identical in all the vine-growing districts 
of the south, the congress laid down a uniform system of regulations 
for all. But while this programme was far beyond the results already 
obtained, it must be acknowledged that it was in great part a failure. 
Since the winter the demand for wine had been small and the pro- 



SOME PROBLEMS OF AGRICULTURAL LABOR 865 

prietors felt the impossibility of employing many workmen under the 
conditions imposed upon them. And partly from necessity, partly 
in retaliation, they dismissed many of the workmen they had engaged, 
and left hundreds of day labourers without work. When they con- 
sented to re-engage them, it was at a lower rate. 

The question for the syndicalists was then to insure respect for 
the agreements already made, and to obtain new concessions, unat- 
tainable without further struggles. So the question was put to the 
congress at Narbonne, whether the time had not come for a general 
strike of vinedressers. The idea was approved, but referred to the 
Federal Council which proclaimed the strike on December 1st, 1904. 

It proved a failure, and was fatal to the prestige of syndicalism 
in the country districts of the south. A rapid diminution in the num- 
ber of syndicates and syndicalists was soon observed. In 1904 the 
Vinedressers' Federation comprised 145 members and 14,084 sub- 
scribers; the year 1905 closed with 157 syndicates and 5,551 members; 
the year 1906 with 143 syndicates and 3,366 members; at the end of 
October, 1907, there were only 109 syndicates and 1,721 members. 
At the same time, the surviving organizations seemed to lose interest 
in the movement. 

Southern workmen are less tempted by strikes, because much can 
be obtained without them. Since the increase in the price of wine 
many proprietors willingly pay their workmen 50 centimes per hour, 
a sum formerly regarded as a maximum, and there are often special 
indemnities, either on account of the high cost of living or for per- 
forming specially hard work. Another cause is that the small pro- 
prietors are rapidly increasing in numbers. Before the phylloxera 
crisis they were very numerous, but owing to that calamity they almost 
entirely disappeared. 

In spite of the more systematic character of the new mode of 
cultivation a labour conquest of the land was begun, but interrupted 
by the frost of 1903 and still more afterward by a failure of demand. 
At the present time subdivision is reappearing. The employers are 
more energetic, and though they have no organizations comparable 
to those of the forest proprietors described by M. Souchon, yet more 
than once strikers have been met by a well concerted opposition. In 
191 2, at Ouveillan, in Aude, there was an attempted strike. The 
employers collected all the men who were willing to work, and formed 
them into strong gangs, thus frustrating all efforts at intimidation. 
Then they hired all the habitations in the village as the leases expired, 






866 AGRICULTURAL ECONOMICS 

and succeeded in forcing the ringleaders to go away by refusing to 
take them as tenants. At Thegan-les-Beziers, in Herault, there were 
strike-breakers who went in succession to all the lands abandoned by 
the workmen. At Vauvert in Gard there is a company for mutual 
insurance against sabotage, which seems to have been the means of 
considerably diminishing the number of acts of violence. At Marsil- 
largues in the arrondissement of Montpellier harmony was restored 
through the constitution of a co-operative society for the warehousing 
and sale of wines. All the workmen proprietors have an interest in 
joining it to secure a better sale of their produce, and they are thus 
withdrawn from the workmen's syndicate which moreover does not 
admit any members of the co-operative society. Doubtless, these are 
only isolated facts, but M. Souchon does not hesitate to regard them 
as symptomatic of a new era. 

Rural syndicalists are for the most part vinedressers, wood- 
cutters, and gardeners. In their ranks may also be found metayers of 
the Bourbonnais, day labourers of Ile-de-France, and even some farm 
servants of the Cemtre, but these form only a small minority in the 
whole or rural syndicalism. In all there may be 642 workmen's syn- 
dicates in agriculture, forestry, fishing, and cattle-rearing, comprising 
60,724 members, that is, only 2.22 per cent of the whole number of 
wage-earners. M. Souchon believes that taking into account the 
continued extension of syndicates of factory workers we may conclude 
that there are between the two forms of labour great differences which 
throw difiiculties in the way of the extension of syndicalism among 
rural workers. 



XVII 
PROFITS IN AGRICULTURE 

Introduction 

Profits are commonly denned as that part of the return to a 
business which remains in the hands of a proprietor after operating 
expenses, rent, wages, and interest have been paid. Now, since 
agriculture is a business in which a large proportion of the workers 
are directors of their own enterprises, it might seem that the question 
of profits in agriculture would early have been made the subject of 
careful and extended study. A mere glance at the readings in this 
chapter, however, would suffice to dispel any such illusion. The 
fact is that agriculture is one of the forms of business in which least 
progress has been made toward identifying and explaining the phe- 
nomena of economic or pure profits. The gross return of the farmer, 
after deducting cash expenses, has commonly been spoken of as his 
profit, and only recently have we begun to allocate any part of this 
lump sum to other accounts — rent upon the land he owns, interest 
upon invested capital, wages for his family and himself. The fact 
that there are relatively few contractual incomes in farming has 
made it difficult to ascertain what the amount of the residual share 
would be if all such prior claims were recognized. 

Such exposition of profits as we do possess has been developed 
largely from the study of industrial and mercantile enterprises. 
There, functions were more specialized, the sources of income more 
clearly differentiated, and contract payments more common. The 
economist readily perceived a fourth share of the total gains of business 
enterprise, which remained frequently, and sometimes in strikingly 
large amounts, after all the participating land, labor, and capital 
had been rewarded at the contract rate. He noted that this entre- 
preneur surplus might be due to skilful selection of helpers, shrewd 
or lucky purchase of materials, or clever organization of the operating 
plant (all of which lower his costs) ; or to a particularly canny selection 
of the enterprise on which he should embark, to a superior selling 
ability, or to the artificial advantages of a monopoly position 
(all of which enhance price and the gross returns of the business). 

807 



868 AGRICULTURAL ECONOMICS 

Professor Seligman, in selection 281, analyzes these various sources 
of profits and groups them under four heads, from "ordinary" profits, 
through chance and speculative profits, to the extraordinary gains 
exacted by monopolistic force. In the selection which follows, 
Professor Fetter makes the point that, whatever the precise source 
of profits, their benefits accrue only to the one who has assumed the 
direction, and with it the risks, of the business. From this he argues 
an identity between control of capital and that opportunity which 
leads on to fortune. 

How well do these theories of profits fit the concrete circumstances 
of agriculture ? Do the figures seem to indicate that there is an ordi- 
nary rate of profit which remains to self-directing farmers over and 
above rent, wages, and interest ? And do the highest labor incomes 
exceed the earning power of the farm manager on a salary basis? 
In order to answer the necessary questions touching profits, it is 
evident that we must keep within our view not merely such material 
as is presented in this chapter but also the data for farm wages, 
agricultural rent, and rural interest rates. For even though there is a 
nominal differentiation between landlord, capitalist, laborer, and 
entrepreneur, their functions are in diverse ways commingled. Thus, 
the so-called landlord, under one of the many forms of lease in which 
he retains a considerable share in the direction of the farm operation 
and receives a share of its product, is an active entrepreneur and 
adds a slice of profits to the share of the farm income which he 
receives as economic rent. Likewise, the capitalist who ventures 
his capital in farm operations in which he knows there is a consider- 
able element of risk makes his contracts in such a way that his 
return will be more than mere interest upon safe investments. He 
is virtually a partner in the business; shall we not call this super- 
interest profits ? 

In both these cases, access to profits has come through the posses- 
sion of capital, whether invested in land or other goods, and indicates 
ways in which the cream of the returns which come from farming 
may be diverted from the farmer himself to the landowner, banker, 
storekeeper, or whoever furnishes the financial assistance by which 
alone he can put his operations through. This suggests a further 
question: To what extent is it also true -that the lack of capital on 
the farmer's part is responsible for the passing of control of his product 
into the hands of others who derive all such profits as come by luck, 
by speculation, or by monopoly control ? In the long run, do farmers 



PROFITS IN AGRICULTURE 869 

tend to get the bare cost of producing their wheat, and the dealers 
who finance the marketing of the crop all the profits ? 

While control of capital clearly does give a tremendous advantage 
to its possessor in the distributive struggle, we must not admit too 
easily that it is the whole story. I have suggested in the Introduction 
(p. 4) that the pioneer was a true entrepreneur, deriving profits both 
from farm operation and from land speculation, by virtue of his 
ability to control a supply of labor rather than capital. The same 
holds true today. In some sections of the West owners of land have 
had to give up active utilization of their ranches (to the end of securing 
profits in addition to wages, interest, and rent) and accept the modest 
returns which belong with passive uses of capital. They have been 
forced to lease to the aggressive Japanese, who took advantage of 
their ability to control an adequate labor force of their countrymen, 
to secure for themselves the cream of profits which would otherwise 
be skimmed by those who held the position of entrepreneurship by 
virtue of their ownership of the land. We need to scrutinize further 
the circumstances which put one or another member of the rural 
group in the position of residual claimant for such surplus as agri- 
culture produces over and above its contractual costs. 

Finally, there is a problem of the utmost social import which we 
should discern underlying the facts of profits in agriculture. This 
concerns the relation of profits to progress. " In ordinary enterprises," 
says Professor Seligman, " profit is the great lure of energy, and com- 
petition the great destroyer of profit. Competitive profits, the union 
of both, are hence the symptom of progress. .... In the long run 
the ability to take advantage of chance fluctuations plays into the 
hands of society at large." To accept this view is to destroy the 
grounds of our complacency over the absence of great profits in 
agriculture, since it is the sign also of an absence of that advancing 
efficiency out of which individual fortunes are created. It suggests 
that the passing of the remarkable democracy of our agricultural 
class may be the passing of a democracy of inefficiency, and the 
emergence of some large incomes for those who do farming in a large 
way (see section C) may be a sign that; new leaders are beginning 
to set new standards of attainment in this ancient calling. 



870 AGRICULTURAL ECONOMICS 

A. The Doctrine of Profits 

281. THE NATURE AND SOURCES OF PROFITS 1 
By EDWIN R. A. SELIGMAN 

Profits are the income from business enterprise, and the entrepre- 
neur may deal in labor, in land, in capital, or in all three. It is hence 
inexact to speak only of the profits of capital. 

The best method of gaining an insight into the nature of profits 
is to consider, first, ordinary profits. By ordinary profits are meant the 
profits of a regular business that deals in a repetition of analogous 
transactions in competition with others. The term normal profits 
which is sometimes employed is less satisfactory, because it incor- 
rectly implies that there is such a thing as a normal or general rate 
of profits, as well as because it brings to mind the conception of normal 
value; whereas profits are a result of fluctuations in market values and 
would not exist in a state of normal equilibrium. Profits are always a 
surplus — the difference between the cost of production or acquisition 
and the selling price. They form a differential, however, in a second 
sense. Profits are the surplus of the intramarginal over the marginal 
producer. At any given time, under competitive conditions, market 
price is the same, but cost varies. The cost of raw material, wages, 
rent, interest on capital borrowed or invested, taxes, and miscellaneous 
outlays like insurance, advertisements, and transportation expenses 
vary from individual to individual. Some will display more care in 
the selection of their labor force; some will choose a more advan- 
tageous location, with a saving in both rent and transportation; some 
will accomplish better results with less capital and economize in 
interest as well as taxes; some will exercise more ingenuity in pur- 
chasing the raw material or securing a market. At the bottom of 
the scale is the marginal producer, working under the least favorable 
circumstances, who can nevertheless get no more for his goods. With 
him price equals cost. The excess of -price over cost constitutes 
profits. 

In ordinary enterprises profit is the great lure of energy, and 
competition the great destroyer of profit. Competitive profits, the 
union of both, are hence the symptom of progress. They can exist 
only by being continually renewed; they are not attached to any 
community, but are a draft on nature. Profits are a result of price, 

1 Adapted from Principles of Economics (3d ed.), pp. 353-59, 366-67. (Copy- 
right by Longmans, Green, & Co.) 



PROFITS IN AGRICULTURE 871 

not a cause of price. Production at a lower cost creates . profits ; 
competition forces prices down to lower cost and eliminates profits. 
Profits can be maintained only by the creation of a continually newer 
cost level lower than the new price. 

Profits are sometimes described as the wages of superintendence. 
There are indeed certain occupations where the income partakes of 
the nature of wages. Commissions of a broker, like the fees of a 
professional man, are really wages, even though they are popularly 
called profits. Wages, however, differ from profits in that wages are a 
stipulated income and profits are a residual income. There is a normal 
rate of wages, there is no normal rate of profits. Wages are a part of 
cost, profits a surplus over cost. The entrepreneur may think that 
he deserves a return for his services, but whether he secures one 
depends on his competitors. There is always a certain level below 
which wages cannot fall, because no work would otherwise be done; 
but the very continuance of competitive profits depends on the abler 
producer cutting down cost to the point where the marginal producer 
earns no profits. The reduction of some wages to zero implies star- 
vation of the laborer and the crippling of the productive force of the 
community; the reduction of some profits to zero means the elimina- 
tion of the inefficient and the continuance of progress. Above all, 
profits differ from wages in that profits are the direct result of price 
fluctuations. The question thus arises as to the dependence of profits 
upon chance. 

Aleatory or chance profits exist in varying degrees. Some are 
essentially unique or sporadic. If I find a pocket-book on the street 
or receive a bequest, the income is wholly aleatory. The line between 
aleatory and ordinary profits is, however, not so easy to draw. In 
the first place, we have a great field of speculative profits, to be 
discussed in a moment. Secondly, there is an element of luck in all 
business. The oscillations of demand and supply are frequently 
influenced by accident. A flood, an invention, a war, a new whim in 
fashion, a chance occurrence of any kind, may affect the individual 
or the group, the producer or the consumer, and by influencing either 
cost or price, modify business profits. In one sense all price fluctua- 
tions are accidental. The aleatory element is inseparable from profits, 
since profits are derived from fluctuations; but the ultimate cause 
of persistent profits is the ability of the individual to take advantage 
of the fluctuation — and in the long run this ability plays into the 
hands of society at large. 



872 AGRICULTURAL ECONOMICS 

A third class of profits includes those which arise from speculation. 
By speculation is meant the purchase or sale of anything in the hope 
of profit from an anticipated change in its price. It differs from 
ordinary trade only in degree, for all profit, as we have seen, has an 
aleatory element. The difference, however, consists in the fact that 
speculation concentrates and intensifies the forces which affect 
demand and supply. So far as it has become the regular occupation 
of a class, differentiated from other business men for this particular 
purpose, it subserves a useful and in moderate times an indispensable 
function. The expert dealer on the exchanges, who studies and pre- 
judges the market, will in the long run secure profits by reducing 
risks and steadying prices. In this wider sense speculative profits 
are earned like other profits. On the other hand, numbers of indi- 
viduals without experience or ability are constantly taking "flyers" 
on the exchanges, and gamble in securities or commodities as they 
would in cards. Speculation here is as demoralizing to earnest effort 
and thrift as is the lottery. 

In the preceding discussion profits, whether ordinary, aleatory, 
or speculative, have been assumed to be subject to competitive 
influences. The free play of competition, however, is often obstructed 
by natural or artificial barriers. When these obstacles are only partial, 
we speak of economic friction; when they are complete, we are in the 
presence of monopoly. In the case of friction, the fortunate possessor 
of the temporary advantages secures an extra gain, which, as we know, 
will ultimately disappear. In the case of monopoly the extra gain 
seems to be permanent. In the deeper sense, however, even monopoly 
profits are not permanent. This is due to the principle of capitaliza- 
tion. As soon as the monopoly producer disposes of his business, the 
profits are capitalized into the higher selling price, and the new 
purchaser will secure only the interest on the capital outlay. Thus, 
under modern economic conditions, even monopoly profits tend to 
dissipate themselves. They are essentially transitory, except in the 
hands of the original owners. With the continual shifting of owner- 
ship, so characteristic of modern life, the original possessors soon 
disappear. Since, however, the original owners at any given time 
are an appreciable body, monopoly profits often assume a great 
importance. 



PROFITS IN AGRICULTURE 873 

282. THE CONCEPTION OF PURE PROFITS 1 
By F. A. FETTER 

The term profit (or profits) means broadly the residual share, the 
one non-contractual income in the business. It is what is left as a 
net gain to that person (or group of persons) who assumes the financial 
risks of the business, after paying off the claims of everyone else for 
any uses or services rendered. Profit in this broad and popular sense 
is a complex of incomes from various sources and must fluctuate in 
nature (as well as in amount) from case to case for reasons that are 
accidental and personal. 

Is there, then, no exacter conception of profits possible ? Among 
the various meanings in which the word is applied is there one not 
pre-empted by another term, one which expresses a sort of income 
found in practical affairs, which business men are constantly trying 
to estimate and of which economists must take account? Let us 
try to express such a conception in this definition: Pure profit is the 
income of the active capitalist as such, attributable solely to the active 
capital-investment in the particular enterprise. It is an investment- 
profit. The amount and rate of investment-profit are peculiar to each 
business and indeed to each investment. It is never an agreed price, 
or a contractual payment. It is the residual after the actual contrac- 
tual dues have been paid, and the estimated value of other factors 
(such as the services of the manager, etc.) have been deducted. The 
investment-profit concept is most nearly exemplified in practical 
affairs in the bookkeeping of a corporation. Out of gross receipts 
must be paid all rents, interest, maintenance, and depreciation of the 
plant, price of materials, wages, salaries of managers and officers, 
fees of directors, etc.; the residue is the amount which' may be paid 
as dividends to stockholders (or added to surplus) without impairing 
the capital-investment. 

Even investment-profit usually is subjected to a comparison which 
divides it into two elements. It is of the very essence of the active 
capital function that it takes the financial risk of the outcome. When 
therefore at the end of the year (or income period) it appears that a 
certain profit has resulted (say $1,000), this is compared with the 
capital invested (say $10,000) and expressed as a percentage on the 
investment (thus 10 per cent). Now this in turn is compared with 
the rate of interest common on the safest loans (say 4 per cent) and 

1 Adapted from Economic Principles, pp. 343-49. (Copyright by the Cen- 
tury Co.) 



874 AGRICULTURAL ECONOMICS 

the remainder is the amount (or rate) by which this active-capitalist 
investment exceeds the current rate of passive-capitalist investments. 
This merely estimated division influences further choice of invest- 
ment. The rate of interest is taken to represent about what capital 
can do by itself (or with a negligible amount of judgment and super- 
vision — an abstract conception) and the excess above that is attrib- 
uted to the successful act of investment. Thus, however far we 
attempt to eliminate the personal service element of management 
from profits, there always remains in any active capital income this 
one element of investing management together with the carrying of 
financial risk. There is a dual character in investment profit; it is a 
capital-income and a labor-income, combined. The distinctive feature 
of investment-profit, which fastens our attention, is precisely this 
excess (or deficit) of income in active capital as compared with the 
normal prevailing rate of time-price, which can be secured by the most 
conservative passive investor. It is the hope of an income of more 
than ordinary interest that is the inducement to active capitalists to 
assume the risk. We may call the amount realized more or less than 
the imputed yield of passive investment, pure investment-profit, 
attributable to the exercise of pure investment function. The amount 
may be expressed as a rate on the investment. This is the utmost 
point that has been attained in the analysis of the complex elements 
of " profits" as popularly used. 

To the person who exercised this function of active capital- 
investment various names have been applied: undertaker, its French 
equivalent entrepreneur, adventurer (especially used in former times 
of one who embarked in foreign trade), and enterpriser. Each of 
these was meant to express the assumption of the financial risk in 
undertaking the ownership of the various factors and of their results 
embodied in the products, in paying off other claimants, and in waiting 
for an income not determinable in advance, but contingent on all 
the various fluctuations of the market. 

Enterprise is the act, or function, performed by the enterpriser, 
and in a different but related sense is the particular business estab- 
lishment, or undertaking, which is carried on by an enterpriser. 
Business management and enterprise are functions not embodied 
completely in any individuals, but diffused more or less among groups 
of men. The active capitalist and the passive capitalist are not in 
contrast absolutely but relatively; the passive capitalist is not, and 
cannot be, completely freed from financial risk. Enterprise is merely 



PROFITS IN AGRICULTURE 875 

in this particular business the assumption of the legal financial 
responsibility to the extent of the enterpriser's credit and resources, 
or in other cases to the extent of the special legal limited liability, as 
(in most stock companies) to the amount invested, or (often in bank- 
ing) to double the amount invested. 

Risk is more or less everywhere in human affairs, but among vari- 
ous kinds of investments there is a well-recognized gradation in the 
uncertainty of returns. The enterpriser in a business takes the more 
exposed frontier of risk, and the various senior securities have prior 
claims. For example, if the business of a corporation goes badly, 
the first mortgage bonds, getting a low rate of interest, are the first 
claim on the income and, in case of insolvency, these bonds would 
be paid out of any assets of the company; so in turn till we come to 
the common stock which gets nothing until all the other claims are 
satisfied but which if the business is prosperous may get dividends 
at any rate permitted by profits. There is thus an investment risk, an 
element of enterprise even in the safest investment, e.g., government 
bonds, but this becomes almost negligible in the case of many well- 
proven investments. 

It is easily seen why the income to enterprise is the most variable 
from one establishment, and from one time, to another. It contains 
within it all the non-contractual elements of income. The laborer 
has taken a fixed wage, the passive capitalist has reduced his risk and 
accepted a fixed interest. Both wage workers and passive capitalists 
have taken the easy way, have "played safe," and have left the 
enterpriser to bear the brunt of the financial risk. The income of 
each of these classes tends to conform to a general market-rate, being 
a medium of the gains and losses when labor and capital are applied 
with various degrees of risk in various undertakings. Enterprise is 
the most movable element. It is specialized risk-taking. Enterprise 
has well been called an economic buffer, which takes up and distrib- 
utes the strain resulting from variations in the momentum and rate of 
movement of industry. The enterpriser feels first the influence of 
changing conditions. If the prices of his products fall, the first loss 
comes upon him, for the goods already made must be sold. Further 
loss is avoided as best it can be by paying less for materials and labor. 
At such times the wage-earners look upon the employer as their evil 
genius, and usually blame him for lowering their wages, not the public 
for refusing to buy the product at the former high prices. When, 
however, prices rise, enterprise gains through selling at higher prices 



876 AGRICULTURAL ECONOMICS 

the stock on hand that has been produced at low cost. Enterprise is 
placed between the forces of competition, between owners of resources 
and ultimate consumers, between laborers and the final purchasers of. 
labor's services. The enterpriser's economic survival is conditioned 
on vigilance, strength, and self-assertion. 

Profits therefore fluctuate more from industry to industry and 
from man to man than do other incomes. The variations of the market 
may sweep away not only all "profits," but all the invested capital. 
As a consequence, profits may be at other times very high, for enter- 
prise will not take the risk of great losses unless there is a chance of 
large gains. While the income of the salaried man is occasionally 
advanced, and then for long periods remains unchanged, the profits 
of enterprise come in waves. In seasons of prosperity profits in many 
enterprises swell with a dramatic swiftness while rents and wages 
move tardily upward. Then again for years profits fall to a level 
hardly exceeding a low interest on the capital invested or leave many 
businesses for a time with a loss. 

B. Profits and the Assumption of Risk 

283. THE FARMER'S RISKS 1 
By JAMES WILSON 

The farmer supplies the capital for production and takes the risk 
of his losses; his crops are at the mercy of drought, and flood, and 
heat, and frost, to say nothing of noxious insects and blighting dis- 
eases. He supplies hard, exacting, unremitting labor. A degree and 
range of information and intelligence are demanded by agriculture 
which are hardly equaled in any other occupation. Then there is the 
risk of overproduction and disastrously low prices. From beginning 
to end the farmer must steer dextrously to escape perils to his profits 
and indeed to his capital on every hand. 

284. THE WILL TO TAKE CHANCES 2 
By H. A. MILLIS 

The strong desire of the Japanese to lease land is explained by 
several facts. In the first place, the members of this race do not like 
to work for wages, are ambitious, and desire to establish themselves 

1 Yearbook of the Department of Agriculture, 1910, p. 26. 

2 Adapted from Reports of the Immigration Commission, Vol. XXIII, 82-84, 86. 



PROFITS IN AGRICULTURE 877 

as business men or as independent producers, as most of them were 
in their native land. This ambition to rise from the ranks of the 
wage-earners has been one of the characteristics most strongly exhib- 
ited by the Japanese and must be emphasized in explaining their 
progress either in business or in independent farming. Moreover, 
by leasing land the farm laborer secures a settled residence, more 
regular employment, and, if he has a family, an opportunity to 
reunite it in this country. 

Furthermore, the Japanese are venturesome. They are not 
deterred by risk to the same extent that members of other races are, 
and are greatly attracted by the unusual profits realized by a few of 
their countrymen. In some instances it has been found that not only 
are they highly speculative in their economic activities, but that they 
are inclined to reckon expenses and losses at too low a figure. All of 
these things have combined to cause the farm laborer to desire to 
become a farmer on his own account, and pride and a limited field of 
employment have frequently kept him from returning to the wage- 
earning class when the profits realized from farming have been small. 

Another fact of importance in this connection is that many of the 
Japanese farmers have required little or no capital to begin with. 
As already indicated, many, in fact most of them to begin with, have 
leased land for a share of the crop, the landlord supplying all or 
practically all of the equipment. This is especially true in all localities 
where much seasonal labor is required and the Japanese are the pre- 
dominant element in the labor supply. In these localities not only 
have the farmers provided most of the necessary equipment, but have 
also frequently provided the money necessary to pay current expenses, 
so that the tenant required no capital at all. Moreover, in the pro- 
duction of sugar beets the beet sugar companies have ordinarily 
advanced a part of the necessary capital. 

One characteristic of Japanese farming is that with their short- 
time interests the farmers frequently specialize greatly in the produc- 
tion of the crop which has proved to be more than usually profitable. 
As a result of the rapid increase of these farmers in certain localities 
and this specialization, overproduction has resulted and profitable 
prices could not be maintained. This is especially true of the straw- 
berry industry, which has been expanded rapidly by the Japanese 
because of handsome profits realized a few years ago, until the prices 
have become very unremunerative. A similar instance of overpro- 
duction is found in asparagus-growing on the Sacramento River, 



878 AGRICULTURAL ECONOMICS 

where many of the Japanese tenants have been involved in great loss 
during the last two years. However, such instances are not common, 
and some of the Japanese farmers have realized large profits and have 
accumulated wealth rapidly. 

285. SPECULATION IN WHEAT-GROWING 1 

The wheat crop of the average Eastern or Middle West community 
seldom involves more than a few thousand dollars; the average 
field seldom means more than a few hundred acres. Whether the 
wheat succeeds or fails will neither make nor break the Eastern or 
Middle West farmer. Even if late spring rains delay seeding, the 
ninety days required to grow and ripen a wheat crop will not bring 
the crop into frost danger of the early fall. Even if your farmer is 
delayed in putting in his crop till June, as many were this year, the 
chances are a hundred to one that he will harvest, house, and market 
his wheat before frost has limed the ground. But in the West, 
in the event of such delay, chances are a hundred to one against 
the farmer. The wheat crop is a gamble pure and simple. Big crops 
mean big fortunes. A failure on a crop means ruin. You can talk 
your head off to the farmer about the folly of depending on a one-crop 
system, of putting all his eggs in one basket, and so forth. As long 
as one year's crop may mean a fortune, Western farmers will chance 
all on that one crop; and one year's big success on a Western wheat 
farm does mean a fortune. It means the mortgage paid, or the cost 
of the machinery paid, or a brick house, or modern conveniences in 
the house, or a motor car, or a winter trip " back East " or to California. 
If it is a great success, it may mean all these things in one year. 

To begin with, the Western wheat fields are not sixty-acre checker- 
board squares. They run from 160 acres — the average homestead — to 
1,000 or 2,000 or 3,000 acres, as the old wheat fields of Texas and 
California ran and as many wheat fields of Montana and Saskatchewan 
today run. Such fields require an earily start in spring and expensive 
equipment in machinery. Much of "the equipment is financed on 
credit. It means tractor engines that plow forty acres a day and disc 
and harrow in the same operation. It means tractors to draw the 
harvester; and in the Walla Walla area are harvesters that reap 
thresh, and sack forty acres a day. The indebtedness of such a farm 
for overhead expenses may run all the way from $2,000 to $20,000 
for the season — this purely for machinery, independently of the man- 
power expense; and the man-power expense of a wheat farm during 

1 Adapted from Current Opinion, LXI (August, 1916), 133. 



PROFITS IN AGRICULTURE 879 

the summer runs from $2.00 a day and board up to $8.00 a day and 
board, this last for the machinist operating the engines. I should 
not be afraid to wager that there is not a wheat farm of 200 acres 
in the West which has not been at some time $2,000 in debt for machine 
expenses for the season. I think of certain farms where the season's 
financing amounted to $30,000 of debt before a strand of wheat had 
been cut. 

Cost of seed, of labor, and of machinery from the planting of the 
seed to the harvesting of the crop is now put at $7.00 to $8.00 per acre. 
Supposing a man has seeded a 1,000-acre field. He stands $7,000 
out of pocket. Now, because the Western wheat lands are nearly all 
uplands they are subject to chill nights. In August come the early 
autumn night frosts. If the frost does not touch your 1,000-acre 
field, you stand, with wheat at $1.00 a bushel, to get $30 to $40 per 
acre. That means a tidy sum from 1,000 acres of wheat after only 
$7,000 of expenses have been paid. In August, therefore, your big 
wheat farmer suffers what can only be described as a sweat of agony. 
He may be living in a tar-papered shanty. His wife may be wearing 
a hat more honored for its age than its style. Whether he can pay his 
debts, whether the mortgage will be foreclosed, whether he can build 
a house and educate the "kids" and buy a motor and take the vaca- 
tion that he badly needs — all depends on the fickle jade called Fate 
from August to September. No Wall Street broker hanging by the 
margin of an eyebrow to ruin or fortune ever knew more of a gambler's 
agonies than the Western wheat farmer in a year when a wet spring 
has delayed seeding. 

Note. — Wheat is by no means the only agricultural venture about 
which this story of farmers' speculation might be told. The cattle- 
feeder takes long chances in the hope of making large gains. The 
southern truck-grower may stake his all on a big acreage of tomatoes 
or onions, the Westerner plunges in fruit, sugar-beets, or cantaloupes. 
— Editor. 

C. Evidence of Profits in Farming 

286. "PROFITS" ON NEW YORK FARMS 1 
By G. F. WARREN 

The average capital on 615 farms operated by their owners in 
Tompkins County, New York, was $5,527. The average receipts for 
the year April 1, 1907, to April 1, 1908, were $1,146. The average 
farm expenses were $389. 

1 Adapted from Bulletin 2Q5, Cornell Experiment Station, 395-9S. 



880 AGRICULTURAL ECONOMICS 

The receipts exceeded the farm expenses by $757. This represents 
the amount that was earned by the unpaid farm labor and the interest 
on capital. If we subtract 5 per cent interest on the capital, or $276, 
and $58, the average value of" unpaid farm labor done by members of 
the farmer's family, we have $423 which is the average labor income 
of these 615 farmers. For their year's labor they received this amount 
of money in addition to having a house to live in and such products 
as the farm furnished. The labor income of tenants averaged $379. 

A farmer's labor income might be nothing or even a minus quantity 
and yet he might live. If a farmer has $6,000 capital, and if the 
receipts were only $200 more than the farm expenses, his labor income 
would be $200 less the amount that $6,000 would earn if placed at 
interest. This would give a labor income of minus $100. Yet, if not 
in debt, the family would have $200 to live on. In this case they would 
be living on their interest, not on the product of their labor. In other 
cases men who are making money according to the opinions of their 
neighbors, really make nothing except interest. They get nothing 
for their work. 

The farmers that are cited as the best ones are often not making 
more than interest on their capital. Others that are not thought of as 
successful are doing well. If a farmer has $10,000 and is not in debt 
or if he has a son working at home, he may be getting ahead and have 
an attractive place and yet not be getting more than interest on his 
capital and pay for the son's work, leaving nothing for his own work. 
Such farms are often written up in bulletins and papers as examples 
of model farming. 

In order to see how accurately profitable farms may be told by 
appearance, each person taking records indicated his opinion of the 
farm while taking the record. Of the twenty-five most profitable 
farms in four townships, only four were correctly classed. One was 
put in the lowest class. The majority of those that were placed in 
the highest class failed to make good labor incomes. The appear- 
ances of a farm are not a reliable indication of profits. Attractive 
farms are frequently kept up by the interest on a large investment. 

A farm cannot be said to be financially successful unless it pays 
all expenses, interest on the capital, the value of unpaid family labor, 
and a good wage for the operator. 

Variation in labor incomes. — The average owner received $423 as 
pay for his personal labor and management for a year, but there were 
wide variations from this amount. 



PROFITS IN AGRICULTURE 



The common wages for a hired man in this region at the present 
time are $300 to $350, with house rent, garden, wood, and milk. 
Some of the better men receive more. Roughly speaking, we may 
say that one-third of the owners made less than hired men, one-third 
made about the same as hired men, and one-third made more than 
hired men (Table II). About one- third of the tenants made less than 
hired men, one-third did about as well as hired men, and one-third 
made more than hired men. It will be seen that 57 owners and 6 
tenants made a labor income of over $1,000, and that 25 owners and 
3 tenants made over $1,500. The highest labor income was $3,668 
made by a man who operated his own farm. 



TABLE II 

Variation in Labor Incomes on 749 Farms 





Operated by Owners 


Operated by Tenants 


Labor Income 


Number of 
Farmers 


Per Cent of the 
Total Number 


Number of 
Farmers 


Per Cent of the 
Total Number 


— $200 or less 


18 

62 

132 

146 

no 

58 

32 
32 
19 

3 

3 


3 
10 

22 

24 

18 

9 

5 

5 

3 

1 
2 
1 
2 


I 

3 
42 

44 

23 

9 

6 

3 


3 



I 


— IQQ— O 


2 


I— 200 


31 

33 

17 

7 

5 

2 


20I— 400 


4OI— 60O 


6oi— 80O 


801-1,000 


1,001—1,500 


1,501-2,000 

2,001-3,000 

Over 3,000 



2 




It is evident that farmers did not receive more than their share 
of the prosperity of the country. The years when these figures were 
taken were periods of good prices and good cropsi There is no ques- 
tion but that farmers in the past received less than their share of the 
prosperity of the country — a fact that found its emphatic expression 
in the great movement from country to city. However, the one-third 
of the farmers who are making more than hired men are a hopeful sign 
for the future. It is now possible to make a good living on the farm. 

To learn how these men were able to do so much better than their 
neighbors is the chief aim of this study. As we proceed, we shall see 
that a number of conditions seem to be necessary for success. 

Percentage of profit made by owners. — Each farmer was asked to 
estimate what it would have cost to have hired the farm work that 



882 AGRICULTURAL ECONOMICS 

he did. These estimates for the farms operated by owners in four 
towns averaged $326. The difference between receipts and expenses 
on these farms was $757. If we subtract from this the value of all 
labor done by the farmer and his family, the balance may be said 
to be interest that the farmer received on his investment. This 
amount is $373, which is 6.7 per cent on the average capital. 

Profits made by landlords. — The landlords' receipts above expenses 
amounted to 8.3 per cent interest on their capital. This appears to 
be a good rate of interest. The money could be loaned on farm 
mortgages at 5 to 5I per cent. But landlords have the trouble of 
looking after their farms. This usually causes more or less worry 
as well as labor. There is also more risk than with mortgages. Crops 
are not so sure as interest. The 2J to 3 per cent seems to be the 
average pay that the landlord gets for the additional trouble and risk. 
An analysis of the figures indicates that, while the majority of the 
landlords made a fair profit, there were none of the fabulous profits 
that sometimes occur in other enterprises. Thirteen per cent of the 
landlords received 4 per cent or less on their money; 23 per cent of 
them received more than 4 but not to exceed 6 per cent; 19 per cent 
got between 6 and 8 per cent; 18 per cent between 8 and 10; 17 per 
cent between 10 and 15; and 10 per cent of them received 15 per cent 
or more on their investment. Of this latter group, 4 per cent received 
a return of over 20 per cent upon their investment. 

The average labor income for the best of the four townships was 
nearly twice that for the poorest township in the case of owners and 
more than twice as great in the case of tenants. The difference was 
less marked in the case of landlords' return, but even here the best 
region excelled the poorest by nearly 50 per cent. The character of 
the land is of more importance to the man who operates it than to 
the landlord. 

287. CONDITIONS IN THE CORN BELT 1 
By E. H. THOMPSON 

An investigation of 273 farms operated by owners in three repre- 
sentative areas in the corn belt shows that the receipts per farm in all 
three regions approximate one-tenth of the capital invested. After 
allowing the expenses of operation, there remains a farm income of 
$1,938. This farm income, which represents the income earned by 

1 Adapted from Bulletin 41, United States Department of Agriadture, pp. 9-1 1. 



PROFITS IN AGRICULTURE 



the combined forces of labor and capital, is the amount available 
to the farmer for his living and savings, provided he had no interest to 
pay on any mortgage or other debt. 

Deducting 5 per cent interest on the average capital leaves an 
average labor income of $408 for the 273 farm owners. This income, 
in addition to the food products furnished by the farm, represents 
the farmer's salary as manager of the business. It is evident that 
these men are receiving only a moderate sum for their year's work. 
If they sold their farms at inventory value and invested the money 
in good securities at 5 per cent, the interest alone on a capital of 
$30,600 would return them $1,530. In addition to this, they would 
have the amount they were able to earn at other work. 

The assertion that farmers are making large profits is erroneous. 
They are living on the earnings of their investment and not on the 
real profits of the farm. A farmer having an investment of $20,000, 
with no mortgage, may receive a minus labor income, yet have nearly 
$1,000 as interest on which to live. It is assumed in this discussion 
that capital should return 5 per cent before allowing the farmer 
anything for his labor. 

Variation in the labor incomes of owners. — In Table III the farms 
are divided according to the labor income received. Each group gives 
the number of men who made labor incomes ranging from minus $500 
and more to over $5,000. 



TABLE III 

Variation in Labor Incomes on 273 Farms Operated by Owners in Indiana 
Illinois, and Iowa 



Labor Income 
Received 


Number of 
Farms 


Percentage 
of Total 
Number 


Labor Income 
Received 


Number of 
Farms 


Percentage 
of Total 
Number 


—$500 and more. 

— 499 to —$200. 

— 199 to 0. 

1 to 200. 
201 to 400. 
401 to 600 . 
601 to 800. 


26 

23 
40 

53 
34 
23 

20 


9 

8 
14 
19 
12 

8 

7 


9 
4 

7 
4 
4 
4 
3 


$ 801 to $1,000.. 
1,001 to 1,500. . 
1,501 to 2,000. . 
2,001 to 3,000. . 
3,001 to 5,000. . 
5,000 and over. . 


13 
19 
10 

5 
3 
4 


4-7 
6.9 
3-6 
i.S 
1 . 1 
1.4 



One farmer out of every 22 received a labor income of over $2,000 
a year. One farmer out of every three paid for the privilege of 
working his farm, that is, after deducting 5 per cent interest on his 
investment he failed to make a plus labor income. Analysis of their 



88 4 



AGRICULTURAL ECONOMICS 



farm business should show the reasons why so many of these men 
failed to receive anything for their labor. Is it because of poor crops, 
inferior stock, improper organization of the farm, or merely plain 
indifference on the part of the farmer ? It may justly be said that 
all these factors are contributing causes. 

Leaving out of consideration the limitations set by the size of the 
farm and the capital invested, the characteristics of the inefficient 
farmer stand out prominently. Economically speaking, the greatest 
losses figured on the basis of a labor income are due to indifference or 
contentment on the part of the farmer. His farm area and capital 
are sufficient to earn a substantial income. He fails through neglect 
of work, low crop yields, inefficient stock, poor farm organization, 
and unused capital. His expenses are the same per acre as those 
of good farmers. His receipts are the weak point. His neighbors 
succeed, not by spending less, but by taking in more. 

The size of the farm must also be considered in figuring losses, 
but large losses are not probable in a small business. The little 
farmer may lose all he has, but the greatest amount he can lose is 
small. 

The relation of profits to the efficiency of the farmer is shown in 
Table XI. 

TABLE XI 

Relation of Profits to the Efficiency of the Farmer on 273 Farms Operated by Owners 
in Indiana, Illinois, and Iowa 





Number 

OF 


Average 
Size 


Average 

Crop 

Area 

(Acres) 


Distribution per Acre 


Labor Income 














Farms 


(Acres) 


Receipts 


Expenses 


Farm 
Income 


Interest 


Labor 
Income 


—$500 and more . . 


26 


267 


199 


$10.98 


$5-97 


$5.01 


$8.74 


-$3-73 


— 499 to — $ 200. 


23 


160 


117 


12.02 


5.92 


6.10 


8.16 


— 2.06 


— IQ9 to 0. 


40 


102 


77 


12.94 


5-53 


7.4i 


8.30 


- .89 


i to 200. 


53 


120 


95 


14.84 


5.7o 


9.14 


8.31 


.83 


201 to 400. 


34 


139 


96 


14.98 


5-37 


9.61 


7.42 


2.19 


401 to 600. 


23 


161 


118 


17.80 


5-79 


12.01 


8.78 


3.23 


601 to 800. 


20 


184 


140 


17.13 


5.16 


11.97 


8.22 


3- 75 


801 to 1,000. 


13 


217 


160 


16.77 


4-5i 


12.26 


8.14 


4.12 


1,001 to 1,500. 


IQ 


201 


169 


19.18 


5-oo 


14.18 


8.23 


5-95 


1,501 to 2,000. 


10 


249 


179 


25-79 


9.60 


16.19 


931 


6.88 


Over $2,000 


12 


330 


240 


25.46 


7.14 


18.32 


8.46 


9.86 


Total or average 


273 


178 


133 


17.28 


6.39 


10.89 


8.60 


2.29 



In Table XI the farms are classified according to labor income. 
The men making the poorest and those making the best profits have 
large farms. Those just " breaking even" have, on an average, small 
farms. 



PROFITS IN AGRICULTURE 885 

Many of these men are also poor farmers, but they cannot be 
expected to do as well as those working a large area. We do not find 
the gross inefficiency among the tenants, for they must earn rent 
which goes to the landlord, and if they receive nothing for their labor 
they cannot live. They have no interest on which to live as does 
the farm owner with a large investment. The country would be 
benefited if the few inefficient farm owners on the large farms were 
persuaded to rent their farms to enterprising tenants. They would 
still have as much or more than they are getting, and the tenant 
would have a good living. 

288. THE CHESTER COUNTY SURVEY 1 
By W. J. SPILLMAN 

The markedly greater efficiency of the large as compared with the 
small farm has been clearly demonstrated when considered from 
the standpoint of the labor income of the farmer; but when we 
consider the subject purely from the standpoint of the interest on 
capital invested the story is a different one, as is seen in Table XXXII. 
In most parts of Europe this matter is considered from the latter 
standpoint only. 

TABLE XXXII 

Income on Capital on 378 Owner Farms, Chester County 



Area groups, acres 


13 to 40 


41 to 60 


61 to 80 


81 to 
100 


101 to 
120 


121 tO 
l6o 


Over 
160 


Total 


Total 
Tenant 


Total 
Special 


Number of farms 


54 


61 


60 


68 


52 


6l 


22 


378 


124 


27 


Percentage farm in- 
come is of capital 


10.4 
4-3 


13-5 
8.6 


132 
9-8 


12.7 
9-7 


12.5 
9.8 


12.6 

10.2 


11. 8 
9-8 


12.5 
9-4 


13-5 
10.4 


17.9 
14.7 


Percentage of income 
on investment when 
value of farmer's 
labor is deducted . . 



The agriculture of Europe is based mainly on income per acre. 
In America more attention is given to income per farm family. The 
reader is left to himself to judge whether it is better for the country 
as a whole that our agriculture should be efficient from the stand- 
point of the people on the farm or from the standpoint of the capitalist 
who owns the land. Fortunately, as yet, in this country the capi- 
talist and the farmer are frequently the same, but even where this 
is the case it is the income per farm family rather than the percentage 

1 Adapted from Bulletin 341, United States Department of Agriculture, pp. 00-7 1 . 



886 AGRICULTURAL ECONOMICS 

of profit on the capital invested which makes for good citizenship in 
the country and for a high standard of living on the farm. 

In making the calculations the results of which are shown in 
Table XXXII the farm income is first reduced to percentage of 
capital invested. In the first line of the table the value of the farmer's 
labor is left out of consideration, the entire net income being treated 
as the percentage of profit on capital invested. There is seen to be 
relatively little variation in the figures for different sizes of farms 
except that in the smallest and the largest groups the figures are 
somewhat smaller than in the intermediate sizes, and in these inter- 
mediate sizes the two smallest show a somewhat larger percentage 
profit than the three groups of larger farms. The last line of the 
table was calculated by using the farmer's own estimate of the value 
of his labor, subtracting this amount from the net farm income, and 
then expressing the remainder as percentage profit on capital invested. 
This method corresponds to that usually used in industries where 
everyone connected with the business receives a salary. The average 
percentage profit calculated in this manner is 9.4 per cent for the 378 
farms operated by their owners. Except for the farms of 40 acres and 
less, there is comparatively little variation in the profits. It is because 
profits have so often been figured in this manner that the public has 
been misled as to the advantages of the large as compared with the 
small farm. It is interesting to note, as shown in next to the last 
column of Table XXXII, that the percentage profit on the tenant 
farms calculated by both methods is larger than it is on the owner 
farms. We shall later see the reason for this. 

The year in which this survey was made happened to be one 
which was rather favorable to the mushroom business, and the 
average profits made by farmers who grow mushrooms were con- 
siderably larger than those of the more usual types of farming in 
this region, as is seen by the last column of Table XXXII. There 
are, however, years in which the reverse is very distinctly the case. 

The average net income of the landlords who own the 124 tenant 
farms here under consideration was, for the year 191 1, 7.3 per cent 
of their invested capital. In comparing the labor income of owners 
and tenants in the same locality, the fairest comparison is made when 
the interest on capital is estimated in both cases on the basis of the 
interest received by landlords. Such a comparison is made in Table 
XXXVII between the 378 farms operated by their owners and the 
124 tenant farms found in this survey. When capital is allowed an 



PROFITS IN AGRICULTURE 



887 



income of 7.3 per cent, the average labor income of the 378 owners 
is $548. Under similar conditions the average labor income of the 
124 tenant farmers is $739. 

TABLE XXXVII 

A Comparison of the Labor Income of Owners and Tenants by Allowing 
7.3 Per Cent Interest on the Total Farm Investment, Instead of 
5 Per Cent (7.3 Per Cent Is the Average Rate of the Landlord's 
Interest on Investment); Survey 191 2, Chester County 





Number of 
Farms 


Number of 
Acres 


Per Farm 




Capital 


Farm Income 


Labor Income 


Owners 

Tenants 


378 
124 


90 
106 


$10,486 
12,030 


$1,313 
I ,6i7 


$548 
739 



Approximately half of this difference is due to the fact that the 
tenant farms on the average are more than one and one-fourth times 
as large as the average of the owned farms, but part is also probably 
due to the fact that the tenant farms on the average have a larger 
number of dairy cows, usually of somewhat more than average quality. 
While these tenants make larger labor incomes than the owners, it 
must be remembered that the owners have the interest on their 
investment in addition to this labor income, so that the owner's 
families have larger total incomes than those of the tenants. 

This bulletin contains ample evidence that the young farmer who 
has relatively little capital will find it to his best interests to become a 
tenant on a farm of considerable magnitude rather than to undertake 
the same type of farming on a much smaller farm which his capital 
might enable him to own. 



D. Some Opinions on Profits in Farming 

289. "WHAT IS THE MATTER WITH FARMING?" 1 
By WALDON ALLAN CURTIS 

There are, of course, all sorts of causes of the contemporary 
desertion of farms in the old states, but the principal cause is that 
farming is badly underpaid, that in no other line of endeavor do the 
same physical strength, mental ability, and capital command so little. 
Desertion has been faster in the East, for the countless factories give 

1 Adapted from The Independent, LXVII (December 30, 1909), 14S5-SS. 



888' AGRICULTURAL ECONOMICS 

the farmer an opportunity to change his employment that is lacking 
in the West. Today the Western farmer, like the Eastern, begins 
to see he is underpaid for his work, and more than that, he sees that 
with the present price of Western farm lands, the interest on his 
investment is glaringly inadequate. For after all, in buying a farm, 
you only buy a job, and if you can get a job without buying it and 
put your money in a bank, how much better you are off. Realization 
of this fact is a great though not recognized factor in the depression 
of Eastern farm values. Realization of this fact will send down the 
high prices of Western lands before those lands have been depleted. 
The farmer sells his labor in the form of dabbages, potatoes, eggs, 
wheat. He makes a small per cent on the cost of his farm, machinery, 
and work animals. Very likely, he barely keeps even on the last two 
items and has them merely that he may sell his labor. In Wisconsin 
a farmer makes his wages and 3 per cent on his investment — a low 
rate for that section. If you are a Wisconsin farmer possessed of an 
average-sized Wisconsin farm, two hundred acres worth the average 
Wisconsin price of one hundred dollars an acre, would it not profit 
you to sell the farm, invest your money at 4 per cent anyway, and 
probably 5, and sell your labor in some occupation in a town? Or 
why should a man in Massachusetts with $5,000 spend it in buying a 
job by buying a farm, when he could buy a house in town for $2,500, 
put $2,500 in the savings bank and sell his labor for money to a mill 
owner instead of to a storekeeper for barter ? 

The census for 1900 gives the national average of the wages of 
white farm laborers working a ten-hour day without board, as eighty- 
seven cents. This was all the farm employee could earn, all the farm 
employer could afford to pay. Any sort of discussion of the remunera- 
tiveness of farming in the last decade is almost needless in view of 
these figures. Montana paid the highest wages, $1.72, the Caro- 
linas the lowest, fifty-three cents. Wages in the South were low, but 
Michigan paid only ninety-eight cents, Wisconsin ninety-nine, Indiana 
eighty-one, Illinois ninety-one. To be sure, the farmer gets his living 
off his place, but the farm laborer working at an average of eighty- 
seven cents has nothing included with that. Perhaps you will ask 
about the stories of farm profits to be read in agricultural magazines 
and about the constant statement of farmers' prosperity in the editorial 
columns of a myriad daily papers. The stories of personal experience 
in the agricultural press are psychologically much the same as patent 
medicine testimonials. The poor fellows like to see themselves in 



PROFITS IN AGRICULTURE 889 

print. A farmer who one year in a discouraging life made three 
hundred dollars from a few pigs tells about it. One profitable apple 
year makes the basis of a wondrous tale to which the paper refers 
editorially when it tells for the thousandth time how much better 
off the farmer is than anyone else. The agricultural paper gives and 
the farmers themselves get the impression that the exception is the 
rule and keep on living in their fool's paradise. That is a diminishing 
number, diminishing relatively, at least, have done so, but cajolery 
has lost much of its power. 

The farmer bumps along because he works more hours than the 
town laborer and because his whole family work. The mill-hand 
goes to work when the morning whistle blows. He has no preliminary 
labor of preparation. His pay begins when his work begins. Before 
the farmer can begin his ten-hour day of actual productive work, he 
has to spend from one to three hours with his animals, tools, vehicles, 
in order that he may use them in the work, and at night he works 
one or two hours after the mill-hand is through for the day. The 
farmer manages because the labor not only of himself, but of his 
children and wife, is given to reach the wage return of a single worker 
in an industrial employment. If the children of the mechanic work, 
they get paid for it. They do not have to throw in their labor with 
that of their father that he may receive a day's wages. People laugh 
because rich men playing farmer spend more than their crops return. 
Even the farmers, who should know better, laugh. Selling below 
cost of production is the whole history of agriculture. Unpaid slaves, 
underpaid peasants, and farmers. When the decline in the size of 
families is advanced as one explanation of the unsatisfactory state 
of agriculture, the nail is hit on the head. The Eastern farmer of 
today simply cannot throw in enough gratis labor with his own to 
make a living. 

There are, of course, exceptional farmers who make money, men 
who raise special things for special markets, and men who, by the 
ability to handle labor, make money from directing the work of 
others, manufacturing wheat and corn. But every cobbler is not a 
shoe manufacturer, and few farmers are more than agricultural 
laborers after all. Be not deceived by big barns full of horses, big 
sheds full of machinery. Look into the house. There may be twelve 
horses in the barn. The house is more poorly furnished than that of 
a factory hand. The family has fewer clothes than that of the factory 
hand. The farmer — in the West — spends considerable sums in the 



890 AGRICULTURAL ECONOMICS 

village, buys harnesses, wagons, mowers, reapers, poisons. He seems 
to others and even to himself a man of means, spending these large 
amounts. But for all his expenditures his returns are only those of 
a moderately paid factory-hand. He has to have all those horses 
and that rolling stock as a prerequisite for earning his day's wages. 

Despite the increased price of provisions in the past few years, I 
doubt if the farmer has begun to feel the advance. Cost of production 
has increased. Think of the single item of the cost of fighting quack 
grass, which has spread through thousands of square miles that 
knew it not a generation ago. Farming is 20 per cent slower where 
the pest exists. We have dozens of insects preying upon both plants 
and animals, which our grandfathers never saw, and this means 
poisons and washes and machines to apply them, to say nothing of 
the time spent in applying them. Soil depletion means more fertilizer 
and the price of fertilizer does not merely increase. It jumps. 

290. FARM INCOME BETTER THAN CITY INCOME 1 

Colonel J. B. Power was for thirty years a surveyor and railroad 
builder before he settled down on his farm in North Dakota. Now, 
at eighty, he has had thirty years of practical experience in farming, 
but has always kept in close touch with city affairs. He is particularly 
well equipped to compare the farmer's income with the income of the 
city man. 

"One of my sons is president of a bank in St. Paul," said Colonel 
Power. "Another is president of a large manufacturing company in 
Minneapolis and a third is here on the farm with me. All are married 
and have families, and all make good incomes. Of the three incomes, 
however, that from the farm is not only the most easily earned but 
it leaves a larger cash surplus than either of my other sons has at 
the end of the year. Our farm here contains 2,500 acres and repre- 
sents a total investment of about $100,000. We actually till 1,112 
acres, of which this year 480 acres was in crops and the balance was 
pasture land. Of these crops our wheat brought $3,734, oats $1,080, 
barley $300, fodder $686, hay $625, potatoes $150. Besides these 
crops there was a garden from which we got vegetables and fruit for 
our two families — my son's and my own — as well as for the hired help. 

"The total cash value of the crops grown on the farm in this year 
was $6,575 an d the total cost in cash of operating the farm was 

1 Adapted from The World's Work, XXIV (September, 1912), 587-89. 



PROFITS IN AGRICULTURE 891 

$2,745. If we had sold all the crops this would have left net receipts 
in excess of expenditures of $3,830 or 9J per cent on the value of the 
land. But this is not all of a farmer's profit. We got from the farm, 
without additional labor, pasturage for 75 sheep, 10 milk cows, 20 
work horses, and the entire herd of 300 beef cattle. By feeding the 
corn, oats, and barley to the live stock we got more for these grains 
than the market prices mentioned above. Taking our average live 
stock sales, it adds another $3,000 net profit to the cash income from 
the farm or, in all, something more than 6 per cent on the investment 
value of $100,000, not all of which investment, however, is utilized 
in producing this income, as more than half of the land is not used 
at all. 

"Now consider what we get out of this investment. We have first 
a living, which includes everything except clothing and groceries, 
and part of them are paid for by the products of the farm which are 
not otherwise converted into cash, such as eggs and butter. This is a 
living for two families. To support two families in either Minneapolis 
or St. Paul, and support them as well as we can support ours on the 
farm, would cost, with present prices, from $2,500 to $4,000 a year 
for each family. I am in a position to estimate this accurately 
because I know very closely what it costs my sons who live in those 
cities to get along. If a living for two families is worth orly $5,000 a 
year in the city, then the income from this farm is equivalent to an 
income of $12,000 a year in the city. 

"In addition there are many other conditions which favor the 
farmer rather than the city man. My son's manufacturing business 
pays him a good salary and an income on his stock, but he is facing, 
first, a constant and rapid depreciation in the value of his buildings 
and machinery, a fluctuating market which may at any time reduce 
his profits to a very small amount if not wipe him out entirely, and 
a tremendous fire risk compared with any such risk we have on the 
farm. If all our buildings were destroyed by fire, they could be 
replaced for probably 15 per cent of the entire capital value. Depre- 
ciation on farm machinery of course figures out at a rapid rate, but 
the total machinery investment is small compared to that in a factory. 
The depreciation on buildings is at a much lower rate than in the city. 
And I am not taking into consideration at all here the fact that if 
we did not raise anything on the farm except barely enough to live 
on, we should still be making $2,500 a year through the increase in 
the land value, which will average at least $1 an acre a year, and this 



892 AGRICULTURAL ECONOMICS 

very much more than offsets any depreciation in buildings and 
machinery. 

"As you get down into smaller farms the comparison between 
the farmer and the city man of equal income is much more favorable 
to the farmer. The city workman who earns $3 a day and pays $12 
a month rent is infinitely worse off than the small farmer who earns 
from his farm only barely enough to maintain his family. The city 
workman is never sure of his job any more than the city manufacturer 
is sure that his business is going to continue to prosper. The farmer, 
whether on a small scale, or a large scale, knows to a certainty that 
there are going to be more people every year wanting the things 
which he produces, and that with ordinary intelligence and a reason- 
able amount of work he can never fail or be out of a job." 



INDEX 



Accounts, chap, vii; cost, 398 ff., 405 ff.; 

interpretation of, 376, 390, 395-96; 

purpose of, 374 ff., 385; specimen 

forms, 379, 380, 386-90, 392-97. 
Advertising, 107-15, 467, 485-86, 532. 
Agriculture: commercial, 8-10, 18, 68- 

77; feudal, 35-52; frontiers of, 126, 

130, 146 ff. 
Amortization of loans, 769, 780, 785, 

795- 
Area of farming land, 129. 
Auction markets, 513. 

Back-to-the-land movement, 221. 

Banks and rural credits, 723, 756-64; 
land banks, 764, 777, 784 ff., 789 ff. 

"Basis" contracts, 500, 507. 

Bonds: debenture, 726, 730, 754; drain- 
age? 737', farm loan: of federal land 
banks, 794; of joint-stock land banks, 
791, 795; in Massachusetts, 778; in 
Missouri, 787; in Oklahoma, 781. 

Broker, methods of, 524. 

California state commission markets, 
553- 

Canadian wheat growing, 130. 

Capital: accounts, 380 ff.; and co- 
operation, 370; and interest rates, 
chap, xiii; and rural credits, 723, 741; 
depreciation of, 267-68, 300, 302; in- 
crease of, 265-67, 276-83, 307; serv- 
ices of, 269-76, 306, 688; working, 
292. 

Children in agriculture, 360, 856. 

Cold storage: in transit, 582; of eggs, 
580; regulated by law, 603 ; specula- 
tion, 608; time of storage, 605. 

Commercial agriculture, 8-10, 18, 68- 
77- 

Commission dealers, 515, 521, 527, 534- 
35- 

Conservation: of land, 128, 190; of 
capital, 284-92, 296-304. 

Consumption: standards of, 79-82, 
115-22; principles, 82 ff. 

Co-operation: benefits of, 261-64; in 
production, 366, 368, 370; possi- 
bilities of, 370; 



— in marketing: gains from, 556; 
cheese, 5 23 ; grain and live stock, 545 ; 
tobacco, 482; vegetables and fruit, 
548; with national organization 
(Landwirtschaftsrat) , 561; 

— in rural credits, 769. 

Co-operative demonstration work, 252. 

Cornering the market, 481. 

Cost: accounting, 398, 405; and profits, 
870; constant, 327-28; diminishing, 
326, 452; increasing, 326, 455; of 
borrowing, 694; of feeding stock, 357; 
of living, raised by increased demand, 
440, 469; of marketing, 547; of plant 
food, 359; of team hauling, 587; of 
transportation, 567; llaw of least 
social, 84, 94-98. 

County farm bureau, 262. 

Credits, rural. See Rural Credits. 

Crop liens, 746. 

Crops, choice of, 328-29; range of 
growth, 331; records of, 386, 397. 

Demand: and value, 416, 418; elas- 
ticity of, 425, 456, 468; factors of, 
465, 472, 482; for capital, 688; ion 
labor, 800, 806, 810, 814; increased, 
and high prices, 469; peculiarities of, 
461; schedule of, 461. 

Depreciation: account, 384; of live 
stock, 304; of machinery, 300; shown 
in inventory, 383. 

Diminishing returns: principle of, 181, 
182, 327; industrial law of, 325; to 
all factors of production, 319, 324-25; 
to capital, 324; to labor, 323; to 
land, 319-22. 

Distribution: of wealth, 614; of prod- 
ucts, see Markets. 

Drainage, 154-56; bonds, 737. 

Dry farming, 146-54. 

Economic vs. technical considerations in 
agriculture, 19. 

Education, rural, 249. 

Efficiency, from co-operation, 261-64 
(see also Co-operation); in feeding. 
357; in marketing, 513. 537, 54;; in 
relation to consumption, 1 24: in rela- 
tion to tenure, 260, 64S; in using horse 



893 






894 



AGRICULTURAL ECONOMICS 



labor, 355; in using man labor, 351; 

measured by accounts, chap, vii; of 

animals, 355, 377, 379; of labor, 351; 

reduced by ill health, 257; result of 

specialization, 328; tests of, 395-96. 
Eggs, method of handling, 577. 
Entrepreneurship, 4, 13, 3135.; and 

co-operation, 371. 
Enterprise: choice of, 311, 316, 329, 

332, 398 ff.; organization of, 360-73. 
Erosion, soil, 174. 
Exchanges, organized, 490. 
Exhaustion of soil, 172, 191. 

Family, unit of production, 360, 370. 

Farm: bureau, 262; family organiza- 
tion of, 360; industrial organization 
of, 362; layout of, 349; management, 
chap, vi; size of, 336, 343~49- 

Farmer: a Jack-of-all- trades, 3645 s edu- 
cation of, 249; needs experience, 247; 
needs organization, 261-64, 362-70; 
negro, 237, 255, 260; socialistic atti- 
tude of, 5. 

Farming, dry, 146-54. 

Fence- inspection law, 297. 

Feudal agriculture, 35-52. 

Fertility, factors of, 158-72; loss of, see 
Exhaustion of Soil; Erosion, etc. 

Fertilizer: economy in buying, 359; in- 
spection law, 296; use of, 338 ff. 

Frontiers of agriculture, 126, 130, 146 ff. 

Frosts, date of, 130, 133-34. 

Future trading, 494, 504; cotton futures 
act, 506. 

Germany, agricultural policy, 7; rural- 
credit institutions, 764. 

Grading: farm products, 491, 496; live 
stock, 519; official cotton standards, 
512. 

Grazing, 27-30, 66, 177, 202. 
Government activities, 142, 252, 553, 

558, 759 ff-, 772-95, 818. 
Government regulation, 296, 297, 496) 

506, 512, 603, 679, 709, 849. 

Health, rural, 118, 257. 
Hedging, 502. 

Housing, rural, 118; of farm help, 842, 
844. 

Immigrants, in agriculture, 223-37, 626, 
818, 820, 852, 853, 876. 



Inspection: of grain, 491 {see also Grad- 
ing); offence, 297; of fertilizer, 296. 

Insurance: companies and mortgage 
loans, 731; role of, 309. 

Interest, chap, xiii; gross vs. net, 693; 
legal rate, 709; rates of, 685 ff., 733, 
743; variation in, 700, 707, 708. 

Irrigation, 138-46. 

Inventory, 380, 381, 392-93. 

Japanese in agriculture: as laborers, 
234, 843; as renters, 626; as proprie- 
tors, 876. 

Jobbers, 467, 528, 534. 

Labor: as factor in production, 210 ff.; 
division and specialization, 211; effi- 
ciency of, 211-12, 246, 247, 257, 260; 
efficient use of, 351; immigrant, 
223 ff. (see also Immigrants in Agri- 
culture); management of, 258, 839- 
48, 852-54; of women, 242, 854; of 
children, 856; standards of efficiency, 
396; supply of, 212, 218, 219, 223, 
228, 799, 804, 816-22. 

Labor problems, chap, xvi; child labor, 
856; dangerous work, 849; employ- 
ment agencies, 851-54; growth of, 
838; hours of labor, 839-40; intem- 
perance, 848; treatment of laborers, 
841-48, 860; strikes, 860; unions, of 
farm workers, 804, 860; women's 
labor, 854. 

Land: area of, 129; title, registration 
of, 698; uses of, 177, 179, 199, 329 ff.; 
value of, 633 ff . See also Soil. 

— policy, and taxation, 679; in Eng- 
land, 681; in Texas, 681; of United 
States, its results, 674; same criti- 
cized, 676. 

Layout of farm, 349. 

Live stock : co-operative selling of, 545 ; 
depreciation of, 304; marketing, 519; 
records, 377, 379, 387-88. 

Location, choice of, for farm enterprise, 
328 ff. 

Machinery: cost of, 299; depreciation 
of, 300; related to efficiency, 271; 
source of farm indebtedness, 718, 721, 
741; use of, 276, 279; wise selection 
of, 268; vs. hand methods, 248. 

Margin of cultivation, 126, 130, 134, 
146; extensive and intensive, 182, 336. 

Marginal: climate, 134; laborer, 798, 
801; land, 618, 620, 623 ff.; saving, 
692; utility, 422. 



INDEX 



895 



Market: auction, 514; cornering the, 
481; for live stock, 519; mechansim 
of, 485-88; methods and problems, 
chap, ix; produce, 5241!.; produce 
exchanges, 490; reaching, by express, 
543; reaching, by parcel post, 540. 

Markets: federal office of, 558; national 
organization of, 561; public, 545; 
state system of (California), 553. 

Middleman: dissatisfaction with, 534; 
methods of, 524 ff., 530; need of, 535, 
537- 

Mortgage: brokers, 723; offerings of, 728. 

Mortgages: crop liens, 746; increase of , 
713; object of borrowing, 719; report 
on (1890), 716. 

Negroes in agriculture, 237 ff., 255, 260. 
Nitrogen: atmospheric, 205; in soil, 
160; problem, 169, 173. 

Organization: of farm, 310; business 
forms of, 314, 360 ff.; co-operative, 
366, 368; ideal, 312. 

Organizer, function of, 313. 

Ownership, a stimulus to efficiency, 260. 

Price: as organizing force, 18; of land, 
633, 636, 638. 

Population, rural, 218-23; profits, chap, 
xvii; and progress, 869; connected 
with risk, 876-79; from different 
crops, 398 ff.; in Chester County, 
Pa., 885; in corn belt, 882; large in 
agriculture, 890; on New York farms, 
879; related to size of farm, 346; 
small in agriculture, 887; sources of, 
4, 867 ff., 870, 873; vs. wages, 867. 

Prices: and market mechanism, 485-86; 
control of, 474, 479, 481, 503, 608; 
depressed by oversupply, 437, 450; 
high, cause of, 440, 469; influenced 
by storage of goods, 608, 612; in- 
fluenced by substitution, 470; influ- 
enced by transportation costs, 567; 
monopoly, 436; speculative, 504, 608; 
steadied by exchange dealing, 494, 
496; theory of, 415, 421, 427. 

Profit sharing, 259; proportion of fac- 
tors of production, 336, 338. 

Rainfall, 137 (map), 149, 155. 

Refrigeration and transportation, 582. 
See also Cold Storage. 

Receivers, wholesale, 526. 

Regulation, government. Set Govern- 
ment Regulation. 



Rent, chap, xi; and speculation, 634; 
as affected by the renter, 622, 626; 
economic vs. contract, 626; theory of, 
615 ff. 

Renting contract, 626; in Iowa, 627; 
in Mississippi, 630; in Texas, 631. 

Retailer, work of, 467, 530. 

Returns, diminishing. See Diminishing 
Returns. 

Risk: covered by insurance, 309; re- 
lated to profits, 867, 875, 876, 878. 

Rural credits, chap, xiv; bank credit, 
264,723,756; cattle bank, 747; com- 
modity paper, 759 ff.; co-operative, 
769; drainage bonds, 737; extent in 
United States, 720; Federal Farm 
Loan act, 789; government aid, 755, 
772, 775; historical aspect, 712 ff.; 
implement dealer, 741; in Germany, 
764; in Massachusetts, 776; in Mis- 
souri, 784; in Oklahoma, 780; life 
insurance company loans, 731; mort- 
gages, 729; mortgage brokers, 723; 
rate sheet, 757; store credit, 722, 745. 

Scientific management, 313. 

Self-sufhcing agriculture, 49, 56-66. 

Share tenants, 628, 630. 

Size of farm, 336, 343-49; how deter- 
mined, 337; relation to profits, 346. 

Socialistic attitude of farmers, 5. 

Soil, erosion of, 174; exhaustion of, 172, 
191; fertility of, 158-72. 

Specialization: advantages of, 328; in 
marketing, 529. 

Speculation, effect of, on prices, 504, 
608. 

Standards: of efficiency, 396; of living, 
81, 88, 122, 124, 800. 

Storage, 491, 612; effect of, on prices, 
567; in transit, 595. 

— cold: period of, 605; regulation of, 
603; speculation, 608. 

Store credit, 722, 745. 

Substitution, a factor in price making, 
470. 

Supply: and transportation rates, 56S, 
574, 576; in relation to value, 417, 
419-20, 427, 437, 450; market fea- 
tures of, 447; of capital, 265, 307, 
684, 691; of labor, 212, 2iS-4_\ 700, 
804, 816-22; of land, chap, iii; per 
capita (of farm products), 443. 

Tenancy, farm, chap, xii; a menace, 
671; in Texas, 6S1; no danger from, 



8g6 



AGRICULTURAL ECONOMICS 



670; relation of to efficiency, 260; 
relation of to rural credits, 752; some- 
times desirable, 673; trend of in 
United States, 665. 

Tenants: cash, 628, 631, 652; share, 
628, 630, 652; share croppers, 630; 
stock-share, 661; their share of prof- 
its, 655, 659; tenure of land, chap, 
xii; relation to quality of farming, 
648, 652. 

Thrift, rural, 307. 

Torrens system of land transfer, 698. 

Transportation costs: and cantaloupe 
prices, 574; by wagon, 587; impor- 
tance of, 566; rates, 567 ff.; related 
to farm values, 645. 

Transportation services: car supply, 
597; concentration privilege, 595; 
diversion, 592; passing reports, 590; 
refrigeration, 582; speed of trains, 
591; stop-in-transit, 595; terminal 
facilities, 599. 

Tropic agriculture, 131. 

Usury law, 709. 

Utility: diminishing, 421; marginal, 422. 



Valorization: of coffee, 474; of cotton, 
479- 

Value, chap, viii; affected by transpor- 
tation rates, 567; cornering the mar- 
ket, 481; of labor contribution, 798; 
of land, 633 ff.; of product, in refer- 
ence to wages, 806; theory of, 415, 
421,427. 

Wages, chap, xv; as related to demand 
for labor, 80.1, 806, 810, 814; as re- 
lated to supply of labor, 799, 804, 
816-22; of self-employed farmer, 797, 
833; rate of, 822, 829, 860, 863; real 
vs. nominal, 796, 801, 822-28; theory 
of, 797, 800; ways of paying (profit 
sharing), 259. 

Warehouse receipts, 491-93, 612, 756. 

Waste, 192, 651. 

Welfare, 78, 117-24. 

Wheat growing in Canada, 130. 

Winds, 133, 136. 

Women's work, 242, 360, 854. 

Yield, per acre, 192-93, 452. 



T3 



